What triggers a GST/HST audit? Many GST/HST audits arise from non-compliant returns, and as a result of the methods the CRA’s uses to select returns for audit. The CRA may decide to conduct an audit based on:
- Financial analysis compared to similar businesses or occupations during current and previous taxpayer years;
- Testing the compliance of certain taxpayer groups, especially if there is the possibility of non-compliance;
- Comparing the results of past audits or investigations;
- Tips and outside information sources; or
- Clues in business records where the CRA is already conducting an audit.
What to Expect from a GST (Goods and Services Tax)/HST (Harmonized Sales Tax) CRA Audit
CRA GST/HST audits begin with a proposal letter outlining the scope of the audit, the period being audited, how long the audit will take, and what information will need to be provided for the auditor to perform the review. Occasionally, the CRA will send an information technology officer in advance of the audit, depending on the complexity of your computer system, to obtain electronic data for a more efficient GST/HST audit.
The next step is usually a meeting between the auditor and your company’s representative at your location. In order to understand the income and expenses of your company, the auditor will ask many questions regarding the business and its operations. These questions are meant to help the CRA identify non-compliance risk areas. It is always best to involve your external accountants in this meeting to prevent unnecessary investigations.
The auditor will review your documents and records, then identify and discuss the issues with you. If not satisfied, they will prepare an audit proposal letter outlining any adjustments and the rationale for them. At this point you are given 30 days to respond to the proposal with more details, supporting documentation, and a counter proposal to resolve outstanding issues.
Following this, a Notice of Assessment or Notice of Reassessment is issued to adjust your return. You will have 90 days to file a Notice of Objection if you disagree with the assessment or reassessment.
GST/HST collected is held in trust. Any assessment of tax is due immediately when assessed. If the adjustment results show that additional tax is owed, interest will be charged on the balance. Even if you appeal, GST/HST must be paid in full. Preventing the issuance of an assessment will help avoid a cash flow burden on your business.
Faris CPA can help you through the entire GST/HST audit process, from the moment you receive an audit letter to the post-audit process. This way you can focus on running your business. As experienced, certified, licensed, and expert tax accounting firm we help our clients minimize negative tax consequences in advance of an audit, as well as during and post audit.
Call us today at for a Confidential Initial Assessment about any accounting or tax matters. As an experienced, certified, licensed, and expert tax accounting firm we help our clients handle all tax and accounting issues. Give us a call today at 1 844 340 5771.
Sam Faris is a Toronto-based Chartered Professional Accountant who practices as an independent consultant on high-level Canadian tax matters and handles disputes with CRA. He has recently published an article a business magazine: HERE