Be prepared for a tax audit

You’re being audited… just knowing that is enough to strike fear in the heart of the average taxpayer.

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"There is no need to panic,” advises Chartered Accountant Geoff Fisher, KPMG LLP in Sudbury. “It is important to be prepared though. After your tax return is assessed, the Canada Revenue Agency (CRA) may select it for further scrutiny. If your return is being reviewed or, as many people refer to it “audited”, you’ll want to have your documents ready. “The tax audit should not normally be a concern, as long as you have maintained proper books and records, not made inappropriate tax filings, and kept all your relevant tax receipts,” says Fisher. An audit of an individual taxpayer will generally be a “desk audit,” while the audit of a business or corporation could involve a “field audit.” A desk audit will usually just translate to providing supporting information for specific claims, while a field audit will generally involve a CRA auditor visiting your place of business. “If, for example, you e-filed your personal return, the audit may be as simple as providing back-up slips for items including Registered Retirement Savings Plans (RRSP) contributions and donations. “For business owners though, a field audit may be more detailed and involve a review of bank accounts, sales and purchase invoices, ledgers, journals, expense accounts and corporate minute books,” explains Fisher. Brought to you by the Institute of Chartered Accountants of Ontario.