Has the CRA selected your business return for review? Here are tips on what to do.

Filing a corporate tax return is a responsibility that every Canadian business owner must navigate annually. In doing so, companies provide the Canada Revenue Agency (CRA) with all the necessary information and documentation to stay tax compliant and avoid being audited.

Sometimes, however, even if you do everything correctly, it’s still possible for your return to get selected for review or even be audited. So, what happens then?

There are three important steps that our team recommends taking if your corporate tax return is selected for review by the CRA. Read on to find out what those are, and to discover the answers to five commonly asked questions about CRA audits.

3 steps to take if your business is audited by the CRA

1) First of all, don’t panic. A review doesn’t automatically mean trouble.

There are a number of reasons that the CRA may have chosen your return for a review, and one of those is random selection. In fact, this is very common, as the CRA regularly conducts random reviews.

With randomly selected reviews, the purpose is to verify a taxpayer’s compliance. It may seem scary, but if you keep good records and follow the rules, it should be relatively painless.

2) Gather the requested documents.

When you are selected by the CRA, you will receive a letter outlining what they require to perform the review. Common items that you can expect to be on the list include:

• Copies of receipts
• Invoices for expenses
• Agreements
• Vehicle logbooks
• Tax slips

3) Send your documents to the CRA within the specified timeframe.

It’s important that you respond to the request from the CRA within the timeframe that they give you. Generally, you will have 30 days to compile and provide the documentation to the CRA from the date of the letter.

If required, you can request an extension with the CRA, and they will usually grant an additional two weeks.

5 commonly asked questions about CRA audits and reviews

1) Why does the CRA perform audits?

There are many reasons why the CRA may perform reviews and audits of tax returns. You can view detailed information on how and why CRA conducts these reviews by visiting the CRA website.

2) What if I can’t provide the requested info?

Typically, if you cannot provide the required supporting information that the CRA has asked for, they will adjust your tax return to remove the unsupported amounts. This will likely result in you owing additional taxes and interest.

3) Why is it important to comply with a CRA request?

If you don’t respond to the request from the CRA, they will not accept the claim in question. As mentioned above, this will likely result in you owing money to the CRA.

In addition, responding to a CRA audit or review request can help ensure that CRA accepts similar claims you make on future returns.

4) Can I handle the request myself?

Yes, you can handle these requests from the CRA yourself. If you’d like support, you can also obtain accounting services to facilitate the compilation and submission of your documentation.

Loren Nancke clients participating in the Audit Shield program may be eligible to have their fees for accounting services covered if they are audited.

5) How long until I hear back from CRA?

Once your response to the CRA has been submitted, processing times can vary. For example, our team has seen responses come through in as little as two weeks, but sometimes they have taken more than three months.

Find out how Loren Nancke can support your finances

We’re known for our smart, straightforward corporate tax and accounting services, as well as our expertise in wealth, legacy and estate planning. Our ultimate goal is to support you on your journey to what we like to call financial serenity by bringing all aspects of your financial life together.

Get in touch with our CPA firm to learn more about how we can support you and your financial goals.

By Carly Boyce

Carly Boyce, CPA, BBA, is one of Loren Nancke’s Senior Accountants. In her role at the firm, Carly works with the team to complete a wide range of accounting services.

Learn more about Carly and the rest of our team.