What Happens If You’re Audited In Ontario?

The possibility of being audited is always there. The Canada Revenue Agency (CRA) may select you or your business at random or if there seems you misrepresented your income. It’s always important, not to throw out any recent tax returns or related documents.

If you hired a third-party company to help you file your taxes, they can offer representation. If you did you’re taxes on you home, you can represent yourself or hire sometime on your behalf. Hiring someone may be costly depending on the amount of work, but it can save you stress and time.

To reduce your chances of being audited, you should be aware of what can raise a red flag at the CRA:

• Having large deductions. While you’re allowed to deduct many expenses for business purposes (such as meals, entertainment, and travel), you shouldn’t claim those that you can’t remember, whether they were for business or pleasure.
• Reporting recurring losses. Some businesses aren’t always profitable, but having a loss year after year will look suspicious, especially since you’re in business to make money.
• Owning a cash-intensive business. Restaurants, bars, salons, and variety stores are just a few examples of a cash-intensive business. There’s an opportunity here not to report all your income if a large portion of sales is cash, which is why the CRA will be more likely to scrutinize your books.
• Employing family members. There’s no law against having your spouse or other family members working for you, but make sure you follow the rules.
• Writing off 100% of vehicle expenses. It will be rare for all your vehicle expenses to be for business use unless you have access to another vehicle.

You needn’t worry about an audit if you keep detailed records and don’t have anything to hide from the CRA. Learn more about your finances with Progress Group.