It is inevitable that at some point in time your business will receive some type of audit from the CRA. This is because we live by a self-assessing tax regime which means the government entrusts us to honestly report our income and our deductions. The audits are a way of them checking that what we have self-assessed is correct.
Usually, the CRA will send a letter listing what the audit is for, what years are being assessed and what documents they need to see. Here are some tips to follow if you receive and audit request:
- Remain Calm – an audit is a part of doing business and if you have been keeping your records properly it shouldn’t be a highly stressful experience.
- Professional Help – contact your bookkeeper or accountant as soon as you get an audit request so they can deal with the CRA auditor for you, you will need to make sure that you have authorized them as a representative for them to do so. If you don’t have a bookkeeper or accountant, I highly recommend you hire one for the audit as they have a lot of experience dealing with audits and the CRA which will help to make this less stressful for you.
- Extension – often there will be a time limit as to when you need to provide the information requested. If you know that you won’t be able to get this to them within that time frame, ask for an extension (or get your bookkeeper to ask). The earlier you communicate this with them the better.
- Make a List – the letter will be very specific as to what information they want to see, make sure you only provide records for the years under review and only the documents that the auditor has asked for. No need to give them any extra information as it could lead to further questions or requests. I would suggest listing everything requested out in an excel spreadsheet so that you can add notes.
- Records – find all your backup records, whether they are in boxes or in an app, compile all the requested items and arrange them in the order from the list (digitally or paper depending on the type of audit).