Tax season is upon us and that means that everyone is focused on gathering their financial data. Filing taxes can be stressful, but the thought of a financial audit by the Canadian Revenue Agency (CRA) can be worse – mostly due to the myths about them out there. However, with a Chartered Accountants to accurately prepare and submit your taxes, if an audit does occur, you will not have much to worry about.
Myth 1: Filing Online Increases Your Chance Of Being Audited
This is not true. When you file your taxes online, you cannot file paper receipts or tax slips as you could when you file on paper. Instead, the CRA will send a request for certain supporting documents for people who file online. People often mistake this document request as an audit. In fact, this is just a simple routine verification for claims you have made.
It is up the individual whether or not they want to file their taxes online or not, but there are many benefits. You get your returns quicker and it is easier to catch mistakes, which lowers your chance of being audited.
Myth 2: Amending Your Taxes Means Getting Audited
If you have already filed but realized you made an error, put something in wrong, or forgot to add something, your best bet is to file an amendment to your taxes. Many people do not do this because they are worried it will trigger an audit.
Any amendment or second return you submit will get screened, just like the first one, but at most it will get looked at only slightly harder. It is always better to file an amendment with a detailed explanation why you are, rather than just letting the error go. You are more likely going to get an audit for not amending your error than you are if you do.
Myth 3: The CRA Will Show Up At Your Door
This myth is only a little bit true. The CRA will sometimes schedule appointments to examine your workplace or home. However, they will never show up unannounced knocking on your door. Most audits take place entirely through the mail. Do not trust anyone that shows up at your home, workplace, or even through email, claiming to be a CRA agent if you have not received a written letter in the mail. This is a common sign of a CRA scam. Contact your Chartered Accountant immediately if you are not sure if something is legitimate before proceeding.
Myth 4: Getting Audited Means You Did Something Illegal
Most tax audits happen because of simple, honest mistakes. To avoid getting audited over avoidable mistakes, consider hiring a Chartered Accountant to file your taxes.
There are many other reasons people get audited besides errors. An audit is just your chance to defend why you claimed what you did. The CRA also does secondary audits to confirm information on the main audit of someone in your life like a spouse, family member, or employer. If your business made more than the industry average it could also trigger an audit, and sometimes the CRA conducts audits at random.
Myth 5: Audits Are Horrible Experiences
This is a myth that stems from history. In the past, government tax agencies were ruthless and harsh. The fear around getting audited was legitimate. Today, after years of complaints about over the top actions, the CRA is more focused on working with taxpayers rather than against them. Not only do most people who are audited never even see a CRA agent in person, but it’s in everyone’s best interest to work together cooperatively.
Audits can be stressful, but a lot of the fear surrounding them comes from myths. To reduce the likelihood of being audited or to make the process of being audited smoother, consider working with a Chartered Accountant Toronto. Having an accountant by your side will make collecting the requested documents, recalculating data, and building an argument for claims easier.