Who are the Canadians Most Likely to be Audited by the CRA?

By Randall Orser | Personal Finances

Every taxpayer’s nightmare is to get a notice from the CRA that you are going to be audited.  Around 30,000 such letters were sent out in 2018 (according to tax lawyer David Rotfleisch) so we are right to be afraid!  

So, who are the people most likely to be audited?

  • Those who are self-employed.  Tax returns for self-employed people are usually more complicated as there is no paperwork like a T4 for the CRA to confirm the income that you have declared.
  • You work in construction, retail or the restaurant industry.  These industries have been singled out by the CRA as they are often heavily cash based and there are high rates of tax evasion.
  • You keep reporting rental and/or business losses. The CRA will wonder if you are really losing all this money or if you are stashing it away in a tax haven.
  • You report drastic swings in income especially if you are self-employed.
  • Your income does not match your postal code. If you are making less than your neighbours, the CRA might begin to wonder how you can afford to live where you do.
  • You have offshore assets.  Owning assets offshore can lead to unwanted scrutiny.
  • You receive wire transfers from abroad of $10,000 or more.  Since 2015 all financial institutions must report to the CRA all international funds transfers of $10,000 or more. 

It is important to really understand the letter that you get from the CRA if it wants to review your taxes.  A tax review notice is not an audit letter.  

Tax reviews are quite common, and it means that the taxman wants to check the records and receipts that you used to report income and to claim expenses.  Reassessments can be done randomly or because the numbers received from other sources does not match with your numbers.  Usually you show them the paperwork and the matter will be over.  However, if you do not respond to the CRA or they do not like your responses to their questions then your review may turn into a full-on audit.

From an article by Erica Alini on www.globalnews.ca

 

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President/CEO Number Crunchers® Accounting Inc. Learn how to just say stuff it to this bookkeeping thing with our 'Just Say: "Stuff It" To Bookkeeping program.