How to Avoid a CRA Audit

Written by David Wickenberg CA, CFP on Aug. 8, 2017

If you want to figure out how to avoid a CRA audit there are a number of things you should know.

Probably one of your worst nightmares is the dreaded audit letter from the Canada Revenue Agency (CRA) informing you that you’re going to be audited and CRA will send out approximately 30,000 such letters this year.

You are at risk if you file late or have outstanding returns or balances owing

Who gets audited?

Technically, everyone can be audited. However, the CRA tends to zero in on certain categories of taxpayers. Some elements of your tax return could also raise red flags and lead to an audit. You’re especially at risk if:

  • You constantly file late or have outstanding returns or balances owing.
  • You’re self-employed. Tax returns for self-employed people are usually more complicated. There isn’t a single piece of paper, like a T-4 slip, that the CRA can use to cross-reference the income you declared.
  • You work in construction, retail or the restaurant industry. The CRA has singled out those industries, where businesses are often heavily cash-based, for extra scrutiny due to high rates of tax evasion.
  • You keep reporting rental and/or business losses. CRA will wonder how you are able to sustain this.
  • You reported drastic swings in income.
  • Your expenses are not comparable to other companies in your industry.

Tax reviews aren’t audits.

When you first get a letter from the CRA it’s important to really understand what they are asking for.

Most common is to receive a tax review notice, sometimes called a pre or post assessment notice, not an audit letter. These are the most common types of requests by CRA.

With a review, the CRA is wanting to check out the records and receipts (the support) you used to claim expenses to verify that no errors have been made.

However, these common tax reviews can turn into full audits if you don’t respond to the auditor’s requests or the response isn’t adequate to satisfy their inquiry. Your response to the CRA is one of the most important steps to take to avoid a CRA audit.

How audits work

To learn about the audit process, read about it in our article on the CRA audit.

Using a tax professional like one of the CPA’s at KWB is the best way to get through an audit or inquiry unscathed and also a great way to avoid a CRA audit in the first place.

If you would like more information or have any questions, feel free to contact us at 780.466.6204, or click here to send us an email.

Thanks to David Wickenberg of KWB Chartered Accountants for providing this content.

David Wickenberg, CA, CFP

David Wickenberg CA, CFP

Partner

David grew up in Edmonton and after going to McNally High School enrolled at the University of Alberta in 1983. David initially enrolled in general sciences in order to have some flexibility in deciding what career path to follow. Teaching, computer science and business were all considerations but it was the flexibility and potential of a business career that led David to the faculty of business. An accounting major appealed to David in his final year since it provided the opportunity to interact with many different people and fulfill his desire to teach others what he knows.

David received his B.Comm from the University of Alberta in 1987 and was awarded his CA designation in 1990. After articling with KPMG he worked for two years in industry. First as a lending officer at a trust company and then at a large retailer as CFO.
David began his own practice in 1992 and after 4 years on his own merged his practice with Gary Koehli’s to form Koehli Wickenberg now KWB LLP. David received his Certified Financial Planner (CFP) designation in 1997 and uses that knowledge to provide full service plans that merge company and personal strategies.

David is married and has two children.

David has previously served on the board of Deal Generator, an initiative of EDE. He also served on the Board of the CKUA Radio Foundation and was the vice-chair for 2005 and 2006 and chair of the planning committee during that same time. It was during his term as chair of the planning committee that he helped develop the first full strategic plan for CKUA. David continues to be a strong supporter of CKUA.

When he’s not preparing tax plans and managing the business, David loves to play basketball or squash and also spend lots of time with his family.

David's Contact Information

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