Nicolas Godbout, fiscaliste et planificateur financier, M. Fisc., Pl. Fin

Surviving a tax audit in 7 steps

Canadian tax  —   —  Share

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For many, the tax audit season, which lasts from June to September, remains a major source of stress. Each year, the Canada Revenue Agency (CRA) implements personal income tax review programs. This is an opportunity for the government to check whether your income tax return has been made in the rules of the art and if, as such, you were indeed entitled to all the deductions you have requested.

A random process

Review programs are randomized among taxpayers. So a check doesn’t mean that there has been an error on your tax return, nor that you are suspected of anything. These 7 steps will allow you to respond appropriately to the Canada Revenue Agency (CRA) while having peace of mind!

1. Understand what the CRA is asking you

If you are subject to a tax audit, you will receive a letter from the CRA. You will usually have to respond to it within 30 days, submitting all the requested documents. It is essential that you fully understand what is being asked of you. You may as well be asked to provide your health care bills, your child care statement, as well as receipts for your eligible expenses as a self-employed worker.

If a question is not clear to you, do not hesitate to contact the auditor responsible for verifying your tax return. His contact details appear at the bottom of the letter you received. Ask him all your questions without embarrassment; this will allow you to respond adequately to his requests.

2. Make a list of the information to be transmitted

Once you understand what is being asked, make a list of the information you want to send. You can use it to check that everything is there when sending your documents. Prepare all the required documents conscientiously and make sure to respect the indicated deadlines. Note that the auditor can go back 4 years and his audit may relate to more than one tax year. If you find it difficult to respond within the required time, do not hesitate to request additional time.

3. Remain courteous at all times

A tax audit is very stressful. So it can be easy to run out of patience when communicating with the auditor. If you need to contact the auditor to ask him to clarify the information they expect from you or to explain their findings to you, it is important to be courteous and professional at all times. You will benefit from remaining respectful.

4. Take note of the auditor’s conclusions

When the auditor has completed his work, he will report his findings to you in writing. Take the time to review all the information he has given you. If there are any changes to your tax return, the auditor should let you know why. If the explanations given are not clear or if you disagree with them, contact the auditor to discuss. It is his job to properly explain the results of his work to you.

It is important that you understand every little change the auditor may have made to your return, as even a tiny change can affect your tax situation for years to come.

5. Dispute the results of the audit

You may agree with the changes made by the auditor. As the contrary can also be the case. In case of disagreement, know that you can dispute the conclusions of the tax audit. You usually have 30 days to do this. To put the odds in your favor, call on a trusted tax expert. This tax specialist is used to accompanying taxpayers on tax audits. His job will be to represent you and assert your rights with the government machine. His expertise will allow you to put the odds in your favor.

6. In case of disagreement, appeal

If no common ground is found, the tax specialist in charge of your case may recommend that you appeal. Even when you receive a new notice of assessment showing the changes made by the auditor, know that it’s not too late to object to the results of the audit. To appeal, you will need to file a notice of objection. Points of disagreement will be reviewed by a senior tax official. At this stage, it is always time to call in a tax expert; he will be able to provide you with the benefit of his vast experience in this field.

7. Seek help from a tax expert

If you are short of time or simply do not feel comfortable responding to the CRA auditor’s requests, we encourage you to hire a tax expert. They can help you with this process and respond to auditor requests on your behalf. You will only have to send him the letter you received so that he can respond by providing the requested documents within the required timeframe. The tax specialist will then follow up with the auditor to inform you of his findings. In case of disagreement, the tax expert may suggest that you appeal and file a notice of objection for you.

At all stages of a tax audit, the Effisca Tax team is there to advise you. Our experienced tax professionals are used to responding to government requests. Our mission is to give you peace of mind.