No one ever wants to have the Canada Revenue Agency ever knocking on their door, telling them that it’s time for an audit. Of course, CRA doesn’t conduct audits in this door-to-door-salesman kind of way; but even with all the notice in the world, no one is ever fully prepared for an audit – and the consequences it could bring. So while you’re getting your taxes ready this year, make sure you take these steps to ensure that you don’t have to prepare for an audit.
Check it twice, then check again
If you’ve made mistakes on your tax return, your odds of being audited will increase. Take it to a reputable tax return preparation company, or use software that will lead you through it step by step. It may take a little longer to do it the latter way, but it sure will be much quicker than an audit that could take much longer, and cause much more stress.
Be extra careful if you’re self-employed
Those who are self-employed have a ton of deductions at their disposal. A percentage of your mortgage, a portion of your utility bills, and even some of your cell phone bill – all these deductions are perfectly legal, yet still perfectly suspect. If you make way too many deductions, or your deductions don’t make any sense, you will have a much better chance of being audited.
Be careful if you have an employer
It’s not just the self-employed that are at risk for claiming too many expenses. If you claim too many charitable deductions or association dues, for instance, the government can easily compare these with people in the same association, or those who are in the same tax bracket as you, and also make charitable donations. Don’t make any more deductions than you should or legally can. It really is as simple as that.
Make your way of living make sense
If you drive a Porsche and live in a mansion that doesn’t have a first or second mortgage on it, and you only made $30,000 last year, it will raise eyebrows. No, the government isn’t going to know what your lifestyle is like when you submit your tax return. But, if your tax return garners you an audit, these are things that will be investigated, and will have any future tax returns you submit be put under more severe scrutiny. And, don’t just assume that the CRA “will never find out.” You never know who’s out there that’s got a vendetta against you, and is more than happy to report these things to the government. It doesn’t happen often, but it does happen. And when it does, the CRA takes it very, very seriously.
