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The Tax Audit Part 7 - After the Audit

Once the audit is complete you will get a Notice of Re-assessment from the Tax Centre.  Read it and try to understand it.  Make sure it matches what you have agreed to, or not agreed to, with the auditor (it should be exactly what was in the proposal letter).  I have actually seen Notices of Assessment that are not the same as the amounts that were proposed by the auditor.

The Tax Audit Part 6 - The Proposal

The proposal letter is exactly what the name indicates, a proposal.  You can either agree or disagree.  You can agree with part of it, all of it, or none of it.  The proposal once it has been discussed will form the basis for any potential re-assessment.
It is very important that when you get a proposal letter you review it right away and determine if you agree with the position the CRA has taken.  If you don’t understand what the letter is saying call the auditor and request a meeting so the auditor can explain the proposed adjustments to you in plain language.

The Tax Audit Part 5 - The Audit Process

I will be explaining the process that should take place here so you can tell a good audit from a bad one.  The first thing a good auditor will do is try to understand your business.  Simply put, if they don’t understand what you do and how you do it, how can they assess the validity of your revenues and expenses.
A good auditor will then review your records (Balance Sheet, Income Statement, Trial Balance, and General Ledger) to confirm that the numbers correspond to the tax return. TIP – Make sure you have done this before giving your records to the auditor.

The Tax Audit Part 4 - Initial Meeting

Do not be confrontational.  Be polite, be kind, be patient, and above all else stay calm.  Some auditors are actually very nice and caring, others not so much.  It is a crap shoot as to what you will get.  Forest Gump said “life is like a box of chocolates, you never know what you will get”, and that is especially true of auditors.  But even if you get the worst, stay positive and calm. 

The Tax Audit Part 3 - Dos and Don’ts for Initial Meeting

The most important thing that can be said for this stage of the audit is do not volunteer information.  I will say it again so there is no confusion.  DO NOT VOLUNTEER ANY INFORMATION.   Answer the auditor’s questions as best you can and nothing else.  If you don’t know or are not 100% sure of the answer then tell the auditor that you don’t recall, and that you will get them an answer.  While I believe honesty is the best policy, it is not lying if they don’t ask.  Answer the questions asked but nothing more.

The Tax Audit - Part 2 - Preparing for the Initial Meeting (full audits only)

The initial meeting can be a very nerve racking experience.  The very anticipation and dread that one usually reserves for a trip to the dentist is nothing compared to the anxiety a meeting with CRA can cause.  At least with the dentist you know what is going to happen, and that the dentist will try to be helpful and gentle with you.  Don’t expect either gentle or helpful when you get audited, if that is what you receive then count your lucky stars.  Make no mistake, the CRA’s job is to assess taxes and collect them, and they are very good at it.  You can represent yourself during an audit

The Tax Audit - Part 1 - Initial Contact

The audit process usually starts with that dreaded letter in the mail from the Canada Revenue Agency commonly called CRA.  The letter is usually a long winded affair that is overwhelming and intimidating.  It is also not written in either official language (English or French), but in Taxese or Accountese (tax or accounting language).  Further, the items requested are not always referred to in terms your average person understands.


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