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RISING WOMEN EXPERT
ADVICE...
I’ve heard that the Canada Revenue Agency
is increasing their auditing of tax returns. Is there anything I should know
about preparing for an audit or what they are looking for?
Audit!! The hair on the back of your neck stands on end and you are
looking to go into hiding! The CRA is working to ensure all Canadians are
paying their fair share of taxes, hence the audits. Relax and know it could
be as simple as a request of information or just verifying what you have
submitted on your tax return. There are two areas that CRA is concentrating
on self-employed/small businesses and charitable deductions.
Let’s cover the donations first. Make sure the charity you are donating to
is still active; go to the CRA website
www.cra-arc.gc.ca/tx/chrts/menu-eng.html to look up the charity.
There are many groups offering incentives to donate to their particular
group. These are in the form of “tax shelters” where you donate a particular
amount and receive a receipt for more than the actual donation. These are
illegal and you will eventually be audited. In 2005, the CRA recouped almost
a billion dollars from Canadians who thought they were doing a good deed. Be
aware.
Now to the business audit. Make sure it is deductible. Be in the know! If
you are not sure call your tax expert, call the CRA, go onto their website.
Because someone says you can does not mean you can. Your best defense is to
keep good records. As much as we love our shoe box accounting system it does
not work to well with the CRA. This does not mean you have to spend heaps of
money on having your books done professionally. That truly depends on your
business volume. Create a spreadsheet to keep all your business listed in
one place and trackable. Match all your deposits, withdrawals and receipts
to your monthly bank statement; these are what an auditor looks at first.
Match your journals and appointments to any business expense you may have,
particularly meals, and keep a log of all kilometers used for business. Save
these details in a safe place as many times audits are for tax returns from
3 years ago. Memory is not always that good. Documentation gives you the
verification.
And last of all, audits are a process. If you still disagree with an audit
you can go to the next step and appeal it. The better prepared you are the
easier and faster an audit will be. The more organized you are means less
panicking when you need to find all the information.
Need more clarity when it comes to your taxes? Contact Diane Colton of
Mobility Tax at 403.235.0095. Diane also offers informative business
seminars. Call for details. |
