Avoid tax audits by “getting it right from the start”
(NC)—You are a small business owner and you file your income tax return on time. When you receive your notice of assessment from the Canada Revenue Agency (CRA), sometimes there is a cheque attached; other times, you are told you owe money. Whatever the outcome, you assume that you are done with the CRA until next year.
But then an envelope arrives and the return address says it is from the CRA. You open it and find out that you have been selected for audit.
Most people can't help but think, why me? Have I done something wrong? Does the CRA think that I'm cheating? Did I make a mistake on my income tax return? How could I have avoided this?
In many cases, a simple lack of awareness about Canada's tax laws and your tax obligations as a business owner can lead to errors in reporting on your income tax return. It can be hard to understand exactly what information or numbers the law requires you to provide, so you give it your best shot and hope that everything is okay.
While some returns are chosen for audit from computer-generated lists and others are conducted based on risk asessments, the good news is that there are some things you can do as a small business owner to ensure you are meeting your tax obligations and that may, in fact, help you prevent costly errors and avoid an audit later on.
Audits can be a lot of work and time-consuming for small business owners, so the CRA is encouraging them to take a bit more time when they file their income tax returns, so they “get it right from the start.”
The CRA says it is investing more of its resources to help small business owners do just that. Several information programs are underway to raise awareness among small businesses of their tax obligations earlier and at key moments in the business cycle. This support is intended to help them comply voluntarily with Canada's tax laws and provide complete and accurate information when they file income tax returns.
To “get it right from the start”, go to www.cra-arc.gc.ca,and click on Information for Business—where the agency has posted a video series on starting a business, as well as plain language information about many tax topics such as what books and records should be kept, details about what an audit involves, contact information for more help, and more.
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