Net Worth Audit Assessment
The CRA performs net-worth assessment audits in two stages:
- They first look at your assets and liabilities at the start and end of the tax year and determine the change in your net worth based on whether those assets and liabilities have increased or decreased; and
- They then look at your expenditures for the same year and compare them to Statistics Canada’s expenditure standards.
The net worth assessment audit method relies on the theory that when a taxpayer has income in a year, they can either invest it or spend it. When an auditor adds up all non-deductible expenditures to the taxpayer’s net-worth and compare the net-worth at the start and the end of the tax year, an increase in net-worth can be deemed taxable income.
Using this method, CRA may assume facts that can be to the taxpayer’s disadvantage.
Faris CPA has successfully challenged this type of assessment, removing significant tax liabilities for taxpayers.
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