Things That Will Lead Your Small Business A CRA Audit
- Author Palani
- Published May 30, 2022
- Word count 687
The last thing a business needs is an audit letter from the CRA. Not only will it disrupt the smooth business operation, but can also put you in a pretty tough spot during the tax season. If the CRA finds any discrepancies in your books, it can also lead to a severe tax audit penalty.
To avoid this, you need to be extremely careful when filing taxes. Also, get yourself a professional tax consultant. It can significantly reduce errors and ease the process of tax filing. Now, let us take a look at a few reasons that might result in a CRA audit.
- Stating unusual income
The CRA knows the typical income of every industry. When your income is higher or lower than the typical income, it draws the interest of the CRA. It brings your small business to their notice. The CRA will use various methods to compare your revenue against many others in your sector and arrive at a conclusion.
- Discrepancies in the revenue
Listing the same revenue on all your tax forms is crucial. When the CRA finds discrepancies in different tax forms, it will probably result in an audit. Make sure that the revenue you enter matches with the ones provided by the employers and third parties.
- Large business deductions
Applying all the business expenses deductions is the most exciting part of the tax filing session. However, you need to be cautious when doing it. Large deductions in the area of promotion, meals, travel, entertainment, and the internet charges will pique the interest of the CRA. Hire a professional tax consultant to prevent false deduction claims and reduce the audit risks.
- 100% claims of business vehicle use
It is not logical to think that you will only use a vehicle for business purposes and not anything else. The CRA knows this and will put you on the audit list in no time. If you have no other vehicle, do not use this as an opportunity to save some tax amount.
Keep a logbook to back up your claims if you do use a separate vehicle only for business. In case of an audit, you can submit the proper documents to support your claims.
- Repeated losses
Losses in small businesses are not uncommon. But, the same kind of loss every consecutive year raises suspicion. When those losses help you reduce the income tax by a large percentage, you are definitely going to receive the audit letter. Be reasonable and list the losses you actually experienced and your revenue expectations.
- Substantial charity deductions
The CRA knows the limit companies of your size spend on charity. So, when you have incredibly large donations listed, it will raise doubts. They will then start the procedures for auditing your business. Especially, donations that involve capital property receive much greater attention than those that don’t.
- Family members on the payroll
Having your family on the payroll helps you keep the overall revenue of the family stable. But, when you pay unusually large amounts to the family members and use that in your deductions, it attracts an audit.
To prevent that, seek the help of a professional tax consultant. They will help you understand the rules of employing a family member and reduce the chances of getting an audit.
- Living larger than your reported income
If you have a super expensive car and a multimillion-dollar home but your reported income doesn’t support that, it will attract the CRA. Being honest with your income and the tax you have to pay for it is the best way to avoid audits.
If caught with tax evasion and fraudulent tax practices, you can face severe legal issues. However, if you are great at budgeting and have reasonable claims, all you need to do is have credible documents to support the claim.
Tax planning is not a one-month job. You need to spend at least three months preparing for the tax season. Moreover, you need to secure all the documents that can help support your claims. Remember, an audit is not always a bad thing unless you are intentionally making false claims.
There are no posted comments.
- The Authentic Manager
- AUDIT SERVICES IN UAE
- 5 Tips to Grow Your Business in 12 Months
- How To Calculate And Manage Capacity in an Agile Environment
- 5 Jaw-Dropping Reasons Why MiMETV is the Best Internet Service Provider in Dhaka.
- The role of small and medium enterprises on the country's economy
- 6 Resources for Leadership Development
- 6 Benefits of Doing Business in the United Kingdom
- 9 tips for digital transformation success
- Creating Psychological Safety through structure and human interaction
- Tips for Establishing Trust as a Leader
- Why has Network Security Become Essential for Businesses?
- Active Listening: Do You Listen to Reply or to Understand?
- 5 Ways To Create A Positive Workplace Culture
- 5 Ways You Should Be Using Digital Signage in the Workplace
- Organization Development
- The world is in chaos: How to lead in times of uncertainty?
- 5 Great Ways To Foster A Positive Workplace Culture
- Why I am successful in the male dominated industry of solar
- How to fill your PMP application form like a pro? (with examples)
- What Makes Successful Mergers And Acquisitions?
- Mistakes Remote Leaders Must Avoid
- Understanding The Importance Of EBITDA When Selling A Business
- When Do You Need To Start Treating Your Side Gig Like A Real Business?
- Why We Need To Update Our Expectations Of The Workplace: The 7X3 Rule
- Adapt and Adjust. Talent Retention Strategies in the Times of the Great Resignation
- Disabling facilitation of public and private sector corruption through risk management
- 6 reasons why businesses need their own mobile app
- Disruptive Technology Machine Learning in Project Management