After you file your tax return there is always a possibility that you and your business are going to be audited. And there is also no guaranteed way to do well. The best way to navigate this process is working proactively to have all the documents in order and being able to present all the documents are requested from you.
I wanted to share some tips with you to avoid the pain of paying penalties and to have the best set of books to be stress free in case of and audit. These tips will help you get the best result from an audit:
- Know your rights: It's important to know why the auditors are requesting a particular document and to understand your rights and the possible criminal implications. Read CRA website and be on top of the tax rules. be aware that you can challenge the results of the audit.
- Don't withhold requested information: always provide the documents on the date they are required. But be aware to provide just the documents they asked for, not too many documents. Just they ones they asked for.
- Communication is key: don't avoid contacting the auditor in advance to set up dates, place of meetings, if you need representation. Having a representative will save you stress as they will deal with the auditors. But don't have meaningless conversation with the reviewer, just ask the questions they ask.
- Be proactive: always keep proper records, record only the expenses you are allow to, keep mileage and home office records!!! If you have employees, keep always contracts in place, and be aware of all the labour rules, both provincial and federally.
- Be responsible: Even if you hire someone to file your taxes, be responsible and review the data, the consistency and that you are in line with other business in your same industry.
These tips work if you file personal or business taxes. The auditor job is to find areas where additional taxes can be collected and yours is to keep your money safe. Always work in advance. Be ready.
We can help you with the record keeping, helping you having an audit-proof set of books. Contact us today if you have questions.
Photo by Scott Graham on Unsplash
