CRA Tax Audit Services
You don’t need a tax lawyer. The experts at Faris CPA get the same results for less than a lawyer’s fees.
The thought of a tax audit by the CRA is the dread of every taxpayer. Even if you’ve accurately reported, proving it to the CRA can be an uphill battle. Every year, the CRA conducts hundreds of thousands of tax audits Canada-wide. In the 2022-23 fiscal year alone, the CRA reported $10.4 billion of tax earned by audit. Technological advances have allowed the CRA to better focus on targeted audits of taxpayers they believe to be at higher risk of tax evasion.
If the CRA is auditing you, trust the services of the audit specialists at Faris CPA. We’ve provided tax audit help and saved taxpayers unnecessary taxes and penalties for over a decade. With the help of a Faris CPA tax audit specialist, you can rest easy knowing that your financial affairs are in capable hands.
Stressed About a Tax Audit? Let Us Be Your Trusted Advocate.
When facing a tax audit by the CRA, you need a partner who understands every detail of the process. With over 25 years of experience and a team led by seasoned experts, including a Certified Professional Accountant dedicated to your case, we’re here to ease your burden and protect your financial interests.
Why Choose Faris CPA?
25+ Years of Expertise: We have decades of hands-on experience in navigating tax audits.
Certified Professionals: Our team, led by Sam Faris, a Certified Professional Accountant, handles every detail.
Personalized Support: We tailor our approach to ease your stress and secure the best outcome.
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Experience Peace of Mind
At Faris CPA, we’re more than just accountants; we’re your dedicated allies in overcoming tax audit challenges. Let us simplify the process, reduce your stress, and fight for the best possible result.
Contact us today to learn how we can help you turn a challenging audit into a manageable, even successful, resolution.
Your CRA Tax Audit Questions Answered
Receiving notice of an impending tax audit is a stressful ordeal that raises questions and worries about your future. If you’re being audited by the CRA, you likely have the following questions:
Why am I being audited?
We provide more specific answers and more detailed discussions on reasons why the CRA chooses to audit a taxpayer in the following sections, but at a high level, tax audit triggers can generally be categorized as:
- Bad bookkeeping and accounting practices
- Numerous mistakes in a tax return
- Year-over-year inconsistencies (income, expenses, etc.)
- Reporting inconsistencies within the same return
Is the CRA reasonable during a tax audit?
If you’re being audited, it’s crucial you don’t assume the CRA auditor will be understanding or reasonable, regardless of how polite they are in their communications. If they’ve chosen to audit you, more than likely, they have made unfavourable assumptions about the numbers you’ve provided and your intentions. Even if they are wrong or your reporting is justified, the burden is on you to provide proof beyond a shadow of a doubt. If not, they will assume they are correct and reassess you accordingly.
What are the chances of successfully completing a tax audit? What happens if the audit isn’t successful?
While we can’t guarantee results, we can point to our high success rate of saving our clients from costly reassessments and significantly reducing their taxes. With our tax audit help, we aim to prepare and submit a solid response package that doesn’t trigger red flags and prevents further escalation.
How long does the CRA tax audit process take? How much will your services cost?
Every tax audit is unique, and the timeframe depends on how extensive it is, i.e., how many line items or returns the CRA is disputing. We provide an upfront estimate of how long your audit will take and what our service fees will be. While our rates are competitive, it’s crucial to understand that the cost of our services is often offset by the reduction of your taxes, costs, time, and stress you get with an experienced CPA and audit specialist handling your tax audit.
Taxpayers the CRA Considers High-Risk and Targets for Audits
You are a high tax audit risk if you:
- Are self-employed
- Work in construction
- Operate a “cash business” like a restaurant, barbershop, or nightclub
- Have repeated losses reported from property or business sources
- Show dramatic swings in income
- Live in a postal code that doesn’t match your declared income
- Were found to have misreported in previous audits
While tax audits happen in any number of situations, like constantly filing taxes late, for example, returns can also be flagged for review for the following reasons:
- A tax audit project on a particular group of taxpayers. Sometimes, the CRA will select a taxpayer demographic to gauge non-compliance within the group. If the CRA discovers frequent non-compliance during that test, they may choose to audit the cohorts of that group as part of a tax audit project.
- A return falls within the CRA’s software parameters. CRA’s software can find discrepancies in individual income and expense items based on previous returns and their likelihood in certain demographic groups, industries, etc.
- During the process of investigation. A taxpayer who is/was under criminal investigation, for example, may be referred to the CRA for review of their income tax returns. Taxpayers who have been audited before or have attracted suspicion from outside the CRA are also at an elevated risk of a CRA tax audit.
- Connected returns. If a return is referred for an audit, any returns that are connected/related to it are also likely to get audited.
What Happens During a CRA Tax Audit
1. Initial Notification
When the CRA initiates a tax audit, an auditor is assigned to your case to review all personal or professional records or the records of another party not under investigation, including spouses and children.
Your tax auditor will contact you by phone and follow up with an official letter stating the tax audit’s time, date, and location. They will specify the years the CRA wants to audit and the documents and records they wish to see. In some cases, tax audits are completed on-site at your residence or place of business, while others take place off-site at a CRA office.
2. The CRA Tax Audit Process
During a tax audit, the documentation under review can range from receipts and invoices to bank statements and personal records. The depth of a tax audit can vary – some may be simple, requiring one or two specific documents, while others are more comprehensive, requiring boxes of paperwork and detailed financial records.
While reviewing your paperwork, the auditor may ask additional questions or request further documentation to clarify or verify information. They can initiate further investigative actions if you say something that makes the auditor suspicious. This is why it’s best to be represented by an experienced chartered professional accountant for the duration of the tax audit process. Not doing so is like representing yourself in criminal court.
3. How Long Does a Tax Audit Take?
A tax audit can be conducted through correspondence, at the taxpayer’s home or business, or a CRA office. The length of the tax audit depends on several factors, including the situation’s complexity, the organization and availability of the taxpayer’s records, and the taxpayer’s level of cooperation.
Resolutions & Appeals: What Happens After a CRA Tax Audit is Completed
The CRA issues its findings upon completing a tax audit. No changes are made if the auditor determines that the initial assessment was accurate.
However, the taxpayer may be reassessed if discrepancies are found. This reassessment can involve additional taxes owed, as well as potential penalties and interest charges.
Understanding Reassessment Resulting from a CRA Tax Audit
After a tax audit, if the Canada Revenue Agency identifies discrepancies or errors in the original tax filing, it issues a reassessment. This document is an official revision of your tax liability and differs from the initial assessment you received after filing your taxes.
The reassessment notice is a detailed statement outlining the tax audit findings. It includes several essential components, such as:
- Summary of Reassessment. At the top of the notice, you’ll find a summary of the reassessment, including the tax year in question and the date of the notice. This provides a quick overview of the changes made.
- Details of Changes. This section breaks down the specific adjustments made to your tax return. It will list the items reviewed and any changes to your income, deductions, or credits. For each adjustment, the CRA will provide an explanation, which helps you understand why a particular change was made.
- Tax Calculation. Following the details of the changes, the notice includes a revised calculation of your taxes. This will show the new amount of tax owed or the amount of refund due, along with any interest or penalties that have been applied.
- Interest and Penalties. If the reassessment results in additional taxes owed, the notice will detail these charges, including the interest rate, its calculation, and the reason for any penalties.
- Explanation of Your Rights. The CRA includes information about your rights as a taxpayer, including how to object to the reassessment if you disagree with it. This section provides crucial information on the deadline for filing an objection and the process to follow.
- Contact Information. The CRA’s contact information is at the bottom. This is useful if you have questions or need clarification on the reassessment notice.
It is vital to understand that a reassessment is not final and can be disputed if there are valid grounds. Always consult an experienced CPA providing tax audit help services before you proceed.
Your Options After a CRA Tax Audit and Reassessment
Review each change carefully when looking at your reassessment notice. Compare the adjustments with your original tax return and supporting documents.
If You Agree with the Reassessment/Don't Have Grounds to Dispute It
If you agree with the reassessment and additional taxes are owed, arranging for payment as soon as possible is critical to avoid further interest and penalties. An experienced CPA providing tax audit help will fight for a manageable repayment plan that has minimal impact on your finances.
Disputing an Audit-Based Reassessment
If you disagree with a reassessment after being audited by the Canada Revenue Agency (CRA), you have the following options:
- File a Notice of Objection. This is the first formal step in disputing the reassessment. You must file the objection within 90 days from the date of the notice of reassessment. You can file online using the “Register a formal dispute (Notice of Objection)” option on the CRA website. Alternatively, you can use Form T400A or write a letter to the Chief of Appeals at the Appeals Intake Centre.
- Provide supporting documentation. Explain why you object to the CRA’s reassessment and include all relevant facts and documents.
The Appeals Process
- An Appeals Officer will review your objection independently.
- They may contact you or your representative to discuss the matter and request additional information.
- The Appeals Officer will make a decision, which could result in vacating the assessment, making a reassessment, confirming the assessment, or making an upward reassessment.
Appealing to the Tax Court of Canada
- If you disagree with the Appeals Officer’s decision, you can appeal to the Tax Court of Canada.
- You must file your appeal within 90 days of receiving the CRA’s decision on your objection.
- Further Appeals
- Decisions made in a General Procedure may be appealed to the Federal Court of Appeal and then to the Supreme Court of Canada.
- These appeals must be filed within 30 days of the Tax Court’s decision (excluding July and August.)
Remember, for tax audits and appeals, you need to consult a CPA who specializes in CRA audit services, especially for complex cases.
Finding CRA Tax Audit Help In Canada
Professional tax audit help from an accountant with an extensive history of representing clients during a tax audit is the only way to ensure the best possible outcome of a CRA tax audit. A specialist accountant provides valuable help in organizing financial records, responding to CRA inquiries, ensuring that all information presented is accurate and compliant with tax laws, and perhaps most importantly, ensuring you do not say or do anything that makes your situation worse during the tax audit.
As experienced CRA tax audit experts, we help our clients handle all tax, audit, and accounting issues.
Our services are crucial for effectively handling the CRA tax audit process and minimizing negative outcomes. Remember, the purpose of a CRA audit is to verify past tax filings, educate taxpayers to encourage future compliance, and find reasons to reassess taxes and justify the audit.
Sam Faris (Founder of Faris CPA)
CRA Tax Audit Case Studies: Examples of Faris CPA’s Audit Experts Protecting Our Clients from Prosecution & Saving Them Considerable Costs in Taxes, Interest, and Penalties
Case Study #1: A CRA Tax Audit Was Preventing Our Client from Receiving $800,000 in HST Refunds
We were hired by a client who runs a business in Toronto and had several issues with the CRA. His income tax and HST returns were audited. His previous accountant made many mistakes, which triggered the audit. The CRA refused to release an $800,000 HST refund because they thought our client was not entitled to it.
Since the books provided by the previous accountant were incorrect, our strategy was to reconstruct the books going back to the business’s inception. During our work, we reconciled all accounts, including the HST and shareholder accounts. Reconciliation included obtaining all required backups and verifying all amounts and their nature to support our entries.
When we presented the corrected books to the CRA auditor, they refused our presentation, claiming the books were manipulated for the audit. We had to escalate our client’s case up the chain of command by involving the team leader, whom we met in person and explained our work in detail.
Our presentation and submissions were then fully accepted.
Not only did our client receive the HST refund in full, with interest, but we also corrected the shareholder account and saved our client excessive personal income tax, interest, and penalties. Most importantly, however, if our submissions had not been accepted, our client could have been prosecuted for tax evasion.
Case Study #2: CRA Net Worth Audit Services that Saved a Client $3.5M in Taxes
A new client referred to us by an existing client underwent a net worth assessment and was subjected to a net worth audit. The financial impact of the net worth audit was significant and would have had a major impact on his life and financial well-being.
Faris CPA is very familiar with this type of audit. While the auditor calculated and analyzed our client’s net worth, our firm performed the same work in parallel. Unlike the auditor, who based his work on assumptions, our work was based on facts and supporting documents.
When the auditor presented his conclusion, our client was hit with a $4 million tax bill. However, based on Faris CPA’s work, the auditor adjusted their net worth audit numbers to reflect ours.
Thanks to our audit specialists’ help, we reduced our client’s tax bill to $500k.
Case Study #3: CRA HST Audit on a Client They Beleived Was Flipping his Principle Residence
Our client was audited for HST on a house he purchased. The CRA claimed that he was flipping houses and should be remitting HST on the sale amount of the home in question. After reviewing the facts and performing an in-depth analysis, we were fully convinced that the house was his principal residence and that our client should not be taxed on it.
We provided sufficient evidence that our client intended to live in the home after his marriage. That evidence included correspondence between his ex-girlfriend, our client, and the architect, wedding invitations, a wedding ring, and other items. The package we sent to the auditor included approximately 400 pages.
In the end, the auditor accepted our argument and evidence in his decision and did not tax our client on the sale of the home.
