How To Avoid Audits with CRA
The CRA's mandate is to audit the financial records of taxpayers and, if appropriate, assess taxes based on the information provided. A CRA audit can lead to an assessment of tax, penalties and interest. An audit may result in a reassessment of income or deductions claimed on a previous tax return or assessments for amounts not previously reported. Audits can be initiated by the CRA through its own initiative or in response to a taxpayer's request for an adjustment or correction. In order to avoid a CRA audit, you should keep your accounting records up-to-date and maintain all required documentation for at least six years. You should also use accounting software that has features that allow you to access your data from anywhere. This way you will always have the most recent data available to share with the CRA, should the need arise. Lastly, the key is to ensure your data reflects the actual transactions that occurred in your business and that you have receipts and documents as verification. In addition, ensure you keep a journal of your kilometres driven or use an app to verify vehicle expenses. Although it is the luck of the draw if you get audited you can be for sure prepared with the above tips and avoid penalties and interest.