How to Reduce the Chance of an Audit from the CRA
Here are a few ways you can reduce the chance of an audit on your business:
1. Make sure there aren’t any major changes in amounts in your expense categories year over year. If you do have a reasonable major change in one of the categories one year, make sure you have the backup paperwork to prove it.
2. Don’t file too many years with a loss. It is common for a new business to experience losses for the first couple of years but if you keep reporting losses, this could be a red flag to the CRA.
3. Only claim reasonable amounts for meals & entertainment and auto expenses. The CRA tends to watch these categories closely.
The best way to run your business is to assume that you are going to get an audit at some point. This means you will keep your books audit proof including keeping backup paperwork for all your transactions, there are some handy apps like HubDoc that can help you to keep all of this organized.