CRA Enforcements

CRA Enforcements 2018-05-24T16:27:40+00:00

CRA Enforcements

What to expect during an audit?

A CRA auditor will contact you by mail or phone, or both, to begin the audit process and inform you of the date, time, and location of the audit.

Normally, on-site audits take place at your personal residence, your place of business, or at your representative’s office. The auditor will present you with a valid identification card upon arrival, and then start the audit. On-site audits can be helpful, because they often allow questions to be addressed quickly and can minimize delays in completing the audit.

If the audit is not conducted on-site, it will take place at a CRA office. The CRA makes the best use if its resources by centralizing the management of some audit files to particular CRA office locations.  This means that you may be assigned an auditor who is located outside your geographic region. In this situation, the auditor will ask that you bring or send any supporting documents required for the audit.

In both cases, the auditor may need to make copies of your electronic records or borrow some of your documents. The auditor will give you a detailed receipt for any borrowed documents and return them as soon as possible.

What does an auditor examine during an audit?

The auditor will examine books and records, documents, and information (collectively referred to as records) such as:

  • information available to the CRA (such as tax returns previously filed, credit bureau searches, or property database information);
  • your business records (such as ledgers, journals, invoices, receipts, contracts, rental records, and bank statements);
  • your personal records (such as bank statements, mortgage documents, and credit card statements);
  • the personal or business records of other individuals or entities not being audited (for example, a spouse, family members, corporations, partnerships, or a trust [settlor, beneficiary, and trustee]); and
  • adjustments made by your bookkeeper or accountant for tax purposes.

During an audit, the auditor may find issues and discuss them with you. You can also raise your concerns with the auditor at any time. Once the auditor completes the examination of the records provided, a number of things can happen depending on the outcome of the examination:

  • Correct assessment: If the auditor finds that your previous assessment is correct, nothing more has to be done. You will receive a completion letter and the audit will be closed.
  • More taxes owed or a refund: If the auditor finds that your return has to be reassessed (which means you will have to pay more taxes or be entitled to a refund), you will receive a proposal letter explaining the reason for the reassessment. You will have 30 days to agree or disagree with the proposal.

If you disagree with the proposal, you are encouraged to contact the auditor to explain why you disagree and provide any additional documents that support your position. The auditor will carefully consider your explanations and respond to your questions about the proposal. If issues remain unresolved, you can contact the auditor’s team leader to discuss further. The team leader’s contact information is included in all correspondence sent to you by the auditor.

CRA Repayment

When a taxpayer is assessed, or being audited by the CRA, the taxpayer may end up owing a substantial amount of money to the CRA for unpaid GST/HST taxes, payroll taxes, corporate taxes or in many cases personal taxes as well. For corporate and personal taxes, the CRA is more lenient and will allow the taxpayer sufficient time to repay if the taxpayer does not miss the instalment schedule agreed with CRA.

As far as GST/HST and payroll taxes are due, the CRA has a very strict policy of collecting those amounts as these are trust funds, and the CRA officers are obliged and provided with discretionary powers to collect those funds as soon as possible. The collection officer starts with the notices, and then start calling the directors of the corporation, and eventually on non-payment would put a lien of your bank account which could affect your established business and your livelihood. The CRA officer will, in many cases, send out a letter to your employer for wage garnishment or to your clients for collection of any unpaid invoices owed to your business. For example, the CRA could now collect any Accounts Receivable balances due on your behalf from your clients directly.

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We have heard many taxpayers complaining about threatening calls from CRA officers demanding payment in full. What we do is review your file, make sure amounts assessed are correct or they’re arbitrary assessments, in which case we can file you returns and reduce the balance owing. Meanwhile, we negotiate a payment schedule with the assigned officer keeping in mind how much you or your business can afford, considering all other regular payments to vendors, employees, etc.

Most of the time the CRA officer would ask you to get a loan from the bank to pay the balances owing to CRA in full and provide them with business income and expenses for the last two months to find out how many installments your business can afford, if necessary. The CRA normally has a policy to collect the trust funds within 12 months, but we can negotiate with the officer and come up with a lenient payment window. We do not recommend that taxpayers deal with CRA collection officers directly, and make sure the firm you hire have the expertise and knowledge dealing with the CRA collection officer and negotiating a payment plan that works for you. Call us today and speak with us. Let us put our experience and knowledge work for your rights.

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