Category: cra-tax-audits-problems-&-representation-in-north-york-ontario

Can You Deal With The CRA Audit And The Steps Needed To Be Followed After Effectively?

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CRA or Canada Revenue Agency is the government organization that keeps a tab on your income and tax responsibilities. If they think that you have been less than truthful or trying to dupe the authorities or simply not following the rules and regulations properly, they can create a huge problem for both individuals and businesses alike. As the owner of a small or medium-sized business, it is important that you keep a clear tab on the expenses and earning of the business and also proper preparation to deal with the CRA tax audit if you are notified about the same. It is possible that you may not come under the radar of CRA in this financial year, but it is not guaranteed that it won’t be happening in the coming years. So, remaining informed about the CRA Tax Audits, Problems & Representation will be a smart move indeed.

Some Information On The Subject – If you have received a notice regarding the CRA tax audit, then there is no need to panic. You need to first make sure that every receipt regarding every expense and purchase an all the required papers are ready. If there is something wrong with the records you do not have the required documents, then things can get really ugly for you, otherwise, there is no reason to worry. The first thing you need to know that the CRA or Canada Revenue Agency is not going to come to your office one day suddenly and ask for all the financial records of your business. You will first be notified about the audit and informed about the date and time of the audit happening.

It is possible that you will have to take all the records and visit their office for the audit, but in most of the cases, representatives are sent to your office to conduct the audit. Once the audit is done, your records will be submitted and the authority will go through that. If they find no discrepancies and are satisfied with the information you have provided then you will get the results back and there won’t be anything to worry about. On the other hand, if something is discovered and CRA is not satisfied with the financial records you provide, then you will have to pay the fine. You will be informed about the fine and the amount payable as well. This may seem to be the end of the things, but that is no true. If you are not satisfied with the audit and think there are problems, then you can fight the decision of the CRA and ask for reassessment as well. There are professionals who will be able to help and represent you in the court. All you need to do is gather information on CRA Tax Audits, Problems & Representation, work carefully, understand the requirement of legal representation, and make the right decisions at the right time. Hence, dealing with CRA audit and the aftermath will become easier.

What Does The CRA Audit Process Entail For A Business?

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As a business owner, especially of a small or medium-sized organization or as an individual contractor, you are more likely to be audited by the CRA. So, along with being prepared by hiring an accountant or relevant services, having a clear idea about what the audit process entails will help you to handle things better. Searching the internet will be quite helpful to gather information on CRA Tax Audits, Problems & Representation in North York Ontario, as there are thousands of websites which will provide the required information. All you need to do is go through the site and the information it is providing.

Details Of The Process – During this research process you will come across the following information describing the steps of CRA tax audit, and they are:

  • The audit process is crucial to the CRA or Canada Revenue Agency
  • The aim of this process is to create a fair tax paying system for the citizens
  • The audit will commence when the CRA auditor contacts you through phone or email or both and inform about the audit to be taken place
  • The representative of the concerned authority will inform you about the date, time and place of the audit
  • The on-site audit takes place at your home or business or at the office or your representative
  • Upon arriving, the auditor will provide a valid ID and then start the audit
  • During the audit, every book and record of the taxpayer will be examined closely
  • The audit process includes checking the books along with asking questions
  • If the audit is not on-site, then it will happen at the office of the concerned authority
  • If you are assigned an auditor and he/she is situated outside your region, then he/she will ask you to either bring or electronically send the supporting documents
  • It is possible he/she will borrow some of the documents but only after informing you and providing relevant receipts with the promise of returning them as soon as they can
  • During the audit, all your financial records including both business and personal will be checked thoroughly and along with the records of your family members, if required
  • If the auditor is satisfied, then the audit will be closed and you will receive a completion letter
  • If the auditor finds that, you owe more tax or deserve a refund, then a reassessment will be done and the next steps will be decided

Knowing these points will help you to prepare for anything related to CRA Tax Audits, Problems & Representation in North York Ontario and help your business further.

Which Factors Can Trigger CRA Tax Audit For Your Business?

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The first thing you need to know about CRA tax audit is the simple fact that, you cannot possibly know when you will be audited. If your business is to come under the inspection, it will happen once you have been informed by the concerned authorities regarding the matter. So, the only thing you can do is research and gather information about CRA Tax Audits, Problems & Representation in North York Ontario and the ways of dealing with the problem. This way, you will know about the professionals who can help and hire one when required.

The triggers to know about – During your research, it will become clear that despite not seeming so, CRA audit does function under rhyme and reason. This is why; there are a few actions which can trigger such an audit for your business. Knowing about these trigger points will help, but the whole matter to tax is an area full of complications. Hence, despite having the knowledge, you will always need help from a capable professional. The triggers that you need to keep in mind are:

  • Making unreasonable claim of expenses is a sure shot way of getting noticed by the concerned authority and ensure CRA audit. Always make sure that the expense claims made are not very high and are effectively proportionate with sales.
  • Using rounded-off totals is a huge triggering factor for CRA audit. If you provided rounded numbers as totals, then the concerned authority will know that, proper records are not being kept and you most likely do not have all the receipts. Using exact amounts will be less feasible to trigger an audit.
  • It may be easy for you to forget a T-slip, but CRA does not forget such things. They tend to charge you 10% penalty the first time and for the next times, the penalty will be 20%. So, being extra careful and not missing anything is another way to avoid the audit.
  • If your business falls under restaurants, construction or small retail category, then you have a good chance of getting audited. Keeping this in mind and being extra careful mostly does the trick.
  • Paying unusually high spousal or children salary and reporting business loses for year after year will have a great chance to trigger a CRA audit for your business. So, do not take these shortcuts and roundabout ways of saving tax.
  • Being self-employed or working as an independent contractor will increase the chance of getting audited. To stop that, you need to declare all your income or clearly state and prove that you are indeed self-employed and not an employee looking for more tax breaks.

Knowing about these points and taking the preventive measures will help you to deal with CRA Tax Audits, Problems & Representation in North York Ontario successfully emerge victorious.

What Are Your Rights and Responsibilities Regarding CRA Tax Audit?

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If you are a small or medium-sized businessman or individual contractor in Canada, then experiencing CRA tax audit us pretty common and normal. Every year, the concerned authority sends capable auditors and audit the books and financial details of businesses all over the country. This is done to ensure that the tax system is fair to everyone in the country. To that end, if you think that the tax audit and assessment has not been done properly in your case, it is very easy and advisable to go for CRA Tax Remediation and Appeals in North York Ontario.

The appeal and its scope – During this appeal, you will be able to inform the concerned authority about your doubts and questions and they will listen to them and take the relevant steps. If the auditor has been wrong or the authority thinks that, your complaint is valid, then you will receive compensation. On the other hand, if your appeal turns out to be incorrect, you have to pay the excess tax amount as well. In short, you have the chance to point out the mistake and make things right. To be able to do this, you need to have some basic idea and information on the subject, along with your right and responsibilities in this context.

Your rights – If you know what rights you have as a taxpayer, then no one can dupe you in any way. On the other hand, if you are aware of your responsibilities, then messing things up won’t be an issue which will make the whole process a lot easier than ever before. It is your right to be served by the CRA with utmost professionalism, courtesy, accuracy and fairness. To that end, the Taxpayer Bill of Rights includes Commitment to Small Business along with 16 separate rights for you.

Your responsibilities – As the taxpayer, it is your responsibility to keep all the required books and records. This way, you will be able to understand and deal with your tax-related obligations and entitlements. These records should be kept for at least 6 years after they have been created. If you use a computer for this record keeping purpose, then all records should be kept in a medium or format that is electronically readable, along with the records kept in paper. Additionally, you must provide all the relevant details, books and records to the auditor, along with giving correct and timely explanations to all the questions by the auditor.

By following your responsibilities and knowing your rights, it will be possible to handle CRA tax audit, CRA Tax Remediation and Appeals in North York Ontario with ease.

Dealing With The Fear of CRA Tax Audits in a Mature Way

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When you are running a business, there are loads of areas which require special attention and finances is one of the most important in that list. Along with earning money and spending it in various areas including development of the business, you need to pay a certain amount to the authorities as the tax. It may seem like wastage of your hard-earned money, but if you do not pay taxes, things can turn really complicated for the business. Therefore, preparing for tax audits and gathering information on CRA Tax Audits, Problems & Representation in North York Ontario will prove to be beneficial.

Learning The Realities of CRA – It may feel a little silly, but in reality, the process of the tax audit is quite a frightening one. If anything is amiss in your finances, or you have been evading tax, then the result can cost you huge fine and other complications. The auditor will ask for the accounting books of your business and receipts for every expense. If anything seems to be untoward or the auditor cannot find a receipt or the calculation doesn’t make sense, then you and your business will face problems from the authorities and the outcome won’t be nice. Hence, if you have a clear idea about the CRA Tax Audits, Problems & Representation in North York Ontario and how to deal with that, then things can be managed perfectly.

Knowing Will Help You Take The Right Decision – Tax evasion may seem beneficial and the best decision for making more money initially, but when you will have to pay 50 – 200% of the evaded sum as fine, things won’t seem so nice anymore. If you ignore the CRA audit notice and other communications, things can turn rather unpleasant. Another important thing you need to remember in this context is the fact that, for the CRA process, you need to fill a questionnaire and if any information given there turns out to be false, even by omission or due to some error, you will be the one to suffer the consequence. So, as soon as you are contacted by the CRA, it will be wise to hire a competent and reputed professional who can help you with this. Having required information and in-depth understanding of the CRA Tax Audits, Problems & Representation in North York Ontario will help you to make the right decision and help you and your business.

What Business Expenses Does The CRA Consider as Tax Deductible?

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Are you worried about paying a hefty sum of money in the form of taxes to the CRA? Do not worry. You can minimize the excess financial burden on you by writing off the taxes. However, it is important to stick to the guidelines issued by the CRA and implement them properly while deducting business expenses to reap the benefits.

To begin with, a taxpayer needs to know what, according to the CRA, constitutes business expenses that are tax deductible. Read on to improve your knowledge about it.

What Expenses are Eligible for Tax Deduction?

There are various kinds of deductible business expenses. A majority of these expenses relate to the sum of money taken to earn business income. However, the CRA imposes some limits on the deduction of capital expenses as well as GST/HST amounts.

By virtue of the capital cost allowance, those who run businesses are entitled to deducting the amount of money involving depreciable assets in the due course of time. The GST/HST expenses can be recovered through input tax credit over time.

According to the CRA, the following expenses can be deducted for your business

  • Business start-up costs
  • Business fees, tax, dues and licenses
  • Use-of-home expenses involving a business
  • Office expenses,
  • Interest charges
  • Insurance

What Advertising Expenses Are Tax Deductible?

The charges pertaining to the posting of advertisements are tax-deductible as per the rules laid down by the CRA. These include expenses related to the business card, finder’s fees and advertisements in the printed publications, such as magazines, in Canada.

With regard to deductions from advertisements at printed publications, it is necessary to bear the following points in mind:

  • If the actual ad content accounts for either 80% or more of the slot of the content that is not related to the advertisements, you are entitled to deduct the full expense.
  • If the slot covered by the ad content is less than 80% of the slot covered by non-advertising content, you are allowed to deduct only 50% of the overall expense.

Business Start-up Costs

The CRA focuses its attention on determining the actual day when the business had started. This is very important as it helps in the calculation of start-up cost. On the other hand, reporting the actual date of a merger is necessary to ensure correct deductions.

For a business acquisition, the date of the merger is central to the calculation of tax deductions.

Business Tax, Licenses, Fees and Dues

As for this category, you can deduct the following:

  • Any kind of business taxes and annual license fees
  • Yearly fees or dues resulting from membership in a commercial or trade association

Use-of-home Expenses

The expenses related to the following items are included in this category:

  • Electricity
  • Insurance
  • Mortgage Interest
  • Property Taxes
  • Heat

Insurance Costs

Deductible commercial insurance considered on this front include the following:

  • Buildings
  • Machinery
  • Equipment

If you have a car, you can report its insurance with the expenses related to a motor vehicle for business purposes.

Office Expenses

According to the CRA, the costs of the following items are deductible:

  • Pens
  • Pencils
  • Paperclips
  • Stationery
  • Printer paper
  • Stamps

Commodities like filing cabinets and furniture are included in capital expenses.

Feel free to contact us for more information on CRA tax audits, problems & representation in North York Ontario.

What is Considered While Calculating Mileage Tax Relief

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Do you use a vehicle to travel from one place to the other place? If yes, then your mileage can result in a tax relief. The sound knowledge of the number of kilometres travelled by you for business purposes can come in handy in the calculation of deductions related to the use of your business vehicle. Precise monitoring of mileage can assist you in saving time at the time of submitting an income tax return.

Why is It Necessary to Monitor Mileage?

Noting down the odometer readings in a timely manner is the sure-fire way of presenting the data about how you have used your vehicle for business purposes to the CRA. For best results in this regard, it is strongly recommended that you should note down the odometer readings on a real-time basis to prevent the possibility of any discrepancy. Keeping a logbook handy can help understand how your vehicle was used during business travel or trips.

How to Mention Mileage to Claim Tax Relief?

Usually, the Statement of Employment Expenses is used for the purpose of reporting vehicle expenses. In order to claim the vehicle expenses, it is important on the part of the owner of the vehicle to report information about it including the following details:

The make, model and the year in which the vehicle was manufactured

  • Total kilometres for which the vehicle was driven throughout the year for business purposes
  • The total distance covered using the car (in kilometres) throughout the tax year
  • The calculation of your motor vehicle expense deduction

In addition, the following information should also be furnished:

  • Maintenance and repairs
  • Fuel
  • Licence and registration
  • Insurance
  • Applicable interest
  • Capital cost
  • Leasing
  • Extra costs
  • Mileage allowances
  • Prescribed rate
  • Automobile benefit

Calculation of Motor Vehicle Expense Deduction

Once you work out the total amount of money which needs to be taken into consideration for the calculation of the vehicle expense deduction of your motor, the rest becomes simple and easy. All you need to do is apply the following formula:

Motor Vehicle Deduction = (Business kilometres/total kilometres) x total vehicle expenses

Allowances Related to Mileage

Regardless of whether or not a vehicle is owned by an employee or their employer, the CRA applies specific rates for the consideration of reasonable per-kilometre allowance. It applies whenever an employer pays for the reimbursement of mileage for an employee.

It is necessary to stay within the rates as specified by the CIA to keep the motor vehicle benefit tax free. Further, it is not necessary on the part of the employees to make a mention of the allowance while reporting the income at the time of filing an income tax return. Any expense which does not come under the allowance is liable to attract taxes.

According to the CRA, an allowance is reasonable when the following conditions are applicable:

  • The allowance is worked out using the number of business kilometres for which a vehicle was driven in a year
  • The amount of money paid towards rate per kilometre is fair and reasonable
  • The employee has not received any reimbursement with regard to vehicle expenses.

Automobile Benefit

At the time of determining an automobile benefit, which is provided by an employer, the calculation is done using the standby charge. The following aspects are taken into consideration:

  • Mileage
  • Operating expenses
  • Costs
  • Fuel
  • Repairs

For more information about CRA tax audits, problems & representation in North York Ontario, contact us now!

CRA Tax Audit Triggers You Should Avoid

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Are you a business owner? If yes, then chances are you already have enough to worry about with managing your business under the stringent Canadian audit laws. Even if you work as a professional or freelancer, you might not want to draw unwanted attention from the CRA (Canada Revenue Agency).

No matter how honest or accurate you may be with documentation, there are certain triggers that attract the attention of CRA auditors and computers. Here is a list of some things the CRA looks for.

Unusual Expenses

Keeping track of income is much easier than keeping track of expenses. Always label receipts whenever you make a purchase. Remember that when it comes to claiming reasonable expenses, there is no better defence than accuracy.

When someone claims an unusually high amount for business expenses, the CRA may wonder if they are mixing in their lifestyle expenses. For example, a business lunch that costs $200 will attract much more attention than once that costs $60.

If possible, try to automate records so that you can corroborate your claim if needed. There are many apps that can help you record vehicle mileage and similar expenses. Record expenses regularly on a real-time basis.

Suspicious Home Office Deductions

When calculating home office expenses, it is important to understand that you can only assert ownership to a dedicated space – a space which you use for more than half the time you devote to your business activities. Any diversion from it can land you in legal trouble.

What can you include in the dedicated space to keep away from such legal issues? The answer is simple – measure the area it takes out of the total area of your home. Laying a claim over 50% of a suburban town home for business purposes may raise a red flag.

Unreasonable Car Expenses

When it comes to car expenses, it is a good idea to tread cautiously. Only include details about trips you take for business purposes. The CRA auditors are more likely to analyse your records if you claim that you use your car only for business purposes.

Repeated Losses

Profit and loss are part and parcel of a business. That said, in connection with the CRA, it is important to show the legitimacy of a business with proper turnover and customers. While a business may have one or two or few bad years, reporting losses repeatedly might lead the CRA to think negatively.

Lavish Deductions Related to Travel and Entertainment

Make sure that your vacation expenses are, in fact, for business-related travel. When filing, record the information related to the venues where meetings were held, the people you met with, and the things that were discussed.

Your best bet to prevent an auditor from taking a second look at your whole return filing is to declare actual amounts. Also, do not forget to check the numbers to ensure the accuracy of your filings. If you are not sure how to go about it, get in touch with Silver Fox Accounting for CRA tax audits, problems, & representation in North York, Ontario.