The Canada Revenue Agency (“CRA”) conducts a broad range of activities to ensure taxpayers are compliant with tax laws and to maintain the integrity of Canada’s self-assessment system.
The idea of getting audited by the Canada Revenue Agency is risky, stressful, time-consuming, and can create unnecessary hardships.
CRA pursues the categories of taxpayers it finds to be at a higher risk of tax negligence. People at an increased audit risk involve individuals who work in the construction or restaurant industry, are self-employed, or have repeated losses from their business.
Being audited by CRA can be an intimidating experience. If not handled properly, a CRA audit can eat a massive chunk of your income. It may result in penalties and interest that can be devastating to your financial situation. For this reason, you should contact a professional for CRA audit assistance as soon as you receive the audit letter from CRA.
Many Canadians make the costly mistake of representing themselves and end up volunteering too much information to make things more complicated. Individuals tend to accept rulings without fully understanding the auditor’s judgment. CRA auditors often make taxpayers feel defensive and vulnerable. Having someone with professional knowledge about the process and knowing your rights throughout that process can be empowering.
What is the CRA Audit Process?
The audit usually starts when you receive a letter from CRA where they tell you about their intention to audit. This letter will put you on notice and outline the information it wants from you, like specific documents and details. After receiving this letter, you must make submissions that the auditor will review.
After reviewing the documents, the auditor may give you a green signal or determine that there is some problem. If there’s a problem, you’ll receive a letter that sets out the proposed reevaluation and the reason for it. This gives you another chance to submit the documents and dissuade the auditor.
Auditors don’t always respond or listen to your reasoning, which can be trouble for you. That’s why working with a professional tax accountant from the beginning is always recommended. This will help you stand empowered during the audit process.
CRA Audits may entail:
- A simple request for source documents for transactions claimed
- Calculation breakdown of figures reported
- Names and numbers of customers, employees or suppliers
- Full disclosure of Bank and Visa Statements
- Review of contracts and agreements
- Visit where “books and records” are kept. (you or your accountant's office)
Why Should I Hire a Professional to Deal with the CRA
An expert, typically an accountant, can organize the information in such a way that the auditor can understand what has been done and why. Getting familiar with regulations about your case can help ensure you are treated fairly and efficiently.
Proper documentation and strong evidence are the keys to putting across your points to the CRA. An accounting firm doing a tax audit can help in sailing through this challenge. However, if you come across the fact that any tax errors have been made that need to be resolved, a professional accountant provides the support to correct them. An expert accountant ensures accuracy and proper source documentation papers with your records to satisfy the CRA Audit.
A professional accountant can help you with the below tax audit support:
- Developing a hands-on strategy to discuss with CRA and managing the process of tax audit
- Negotiating with CRA to ensure a fair and transparent process
- Ensure that penalties and prosecutions are minimized to an acceptable level
- Reviewing the submission and representation before the CRA
Advantages of Hiring a Professional Tax Accountant For CRA Audit
Professional tax accountants can give a definite strategy to free taxpayers from the complicated process of dealing with the CRA
1. A professional tax accountant will protect your rights as a taxpayer
One of the rights of a taxpayer is the prerogative to choose a tax professional who can represent him/her before the CRA. This right to tax professional representation is enshrined in the Taxpayer Bill of Rights of Canada.
The mindset of most people is that getting the services of a tax professional is a show of guilt. But, no, it’s not. We have to change this negative thinking because picking a representative who knows about tax law can give you peace of mind when it comes to your tax issues.
A tax accountant has considerable knowledge about tax litigation and knows how to deal with the CRA to defend your rights as a taxpayer and protect your assets.
2. You won’t deal with the CRA directly
Working with a tax accountant gives you the benefit of not having to deal with the CRA directly. All you have to do is talk with your representative, and the latter will speak and negotiate with the tax agency on your behalf.
3. A tax accountant is competent to handle matters, such as:
- Answering phone calls and letters from the CRA.
- Preparing and submitting the necessary documents to the CRA.
- Ensuring your rights as a taxpayer are protected.
- Filing your tax returns.
- Representing you during audits and hearings.
It’s not easy to handle your tax problems on your own. Just imagine the work you have to put in throughout a complex tax audit or proceedings. You need to have an effective tax professional to ensure that you’ll overcome your tax issues. It will also save you time and effort.
4. You can settle your tax debt for less – save yourself from hefty penalties
There’s also the possibility of settling your exorbitant taxes in the lowest possible settlement if you hire a professional tax accountant. Tax accountants are well-versed in the Canadian tax code and know what are the existing loopholes so that they can reduce their clients’ tax debt or get you tax debt relief.
If your tax debt already amounts to thousands of dollars, of course, you want to minimize it as much as possible. Hiring a tax professional is the key for you to save money on your tax obligations. Your tax specialist can settle your tax debt with the CRA for less or make an Offer in Compromise to lessen what you owe to the tax bureau.
A tax accountant can also eliminate the accumulated penalties and interest to make your tax debt affordable to pay. There are cases when taxpayers only have to pay the principal amount of what they owe after a successful negotiation with the CRA through the help of tax attorneys.
Tips When Hiring An Accountant for Tax Resolution with the CRA
You need to make sure that you hire a licensed specialist tax accountant to help you with your tax problems. Here are some tips you have to keep in mind when hiring a tax accountant:
- If you are looking for a tax professional online, keep an eye out for certain things. Make sure that the website gives the full names, bios, and terms of service of the tax professionals.
- Don’t get drawn to so-called promises, guarantees, and too-good-to-be-true testimonials. Instead, visit the Better Business Bureau website to see if the tax resolution firm is legit.
- Make sure to talk with a licensed tax accountant who is going to represent you. Your representative can be the owner of the firm or one of its associates.
- Don’t forget to ask important questions to the tax specialist. For instance, you can ask how he/she conducts tax return reviews. Make sure that the answers are sensible enough before you hire him/her.
- Pick an accounting firm that provides the best accounting and tax services possible for what you’re paying. Yes, there are affordable tax specialists. But some of them may take shortcuts and neglect the crucial points of your tax case. Good tax accountants will look closely into your case full-time and create the necessary solution for it.
CRA audit is a detailed, comprehensive process – Get an expert involved
We understand the details and complexities involved in the Canadian tax system and can help individuals and businesses dispute their tax assessments and achieve their desired resolution. Using a combination of in-house experts and strategic partners, we offer a selection of premium accounting services to help you financially succeed. If you have any questions about your taxes or need assistance with filing, consider reaching out to Filing Taxes tax professional for guidance at 416-479-8532. Schedule an NTR engagement appointment with us and take the first step toward proper management of your finances.
Disclaimer: The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.