Top Myths about Canadian Small Business Tax Audits
Filing taxes can be taxing, even for small business owners who love numbers. That’s because Canada’s tax laws are always in a state of flux and changing from year-to-year.
A lot of small business owners are afraid that making a mistake on their taxes could lead to a tax audit. While getting audited by the Canada Revenue Agency (CRA) is uncommon, many myths have arisen about getting audited.
Below, we expose 5 of the top Canadian tax audit myths, so you can tell tax audit fact from fiction.
Myth 1: Online Tax Filing Increases Your Chances of Being Audited
Millions of Canadians file their annual taxes online; and the number of those that do so grows every year.
Filing your taxes online does not mean the chances of your business getting audited are increased.
It is possible that the CRA will ask you to send in supporting documents (since you can’t send them in when you file online) but that’s just so they can verify a claim or expense.
Myth 2: Amending Your Taxes Leads to an Audit
If you’ve already filed your taxes and realize you made a mistake or forgot to add something, it’s important to file an amendment to your taxes. Many Canadians do not do this because they think it will trigger an audit.
Your amendment, or second return, gets treated just like your first one; although it might get looked at a little harder. Regardless, it’s better to file an amendment and explain why you are doing so then letting it slide.
Myth 3: Getting Audited Means You Did Something Illegal
For the most part, tax audits happen because something doesn’t look right in the tax filings. More often than not, this is because of a simple, honest mistake.
The best way to avoid mistakes that attract the attention of the CRA is to hire tax professionals with a long history of working with others in your industry.
Myth 4: The CRA Uses E-Mail to Conduct E-Audits
The CRA will not send you an e-mail telling you you’re being audited, and they will not ask you to fill out a questionnaire looking for your Social Insurance Number, personal banking information or PINs.
Nor will the CRA call and tell you that if you don’t pay up a certain amount, they’ll send the police over. They also don’t show up unannounced and conduct an audit.
If you’re uncertain whether something is legitimately from the CRA or a scam, contact your tax professional.
Myth 5: Audits Are Horrible Experiences
Audits aren’t exactly on anyone’s wish list, but they don’t need to be terrible.
The CRA is thorough when it comes to an audit, but they’re generally more focused on working with Canadian tax payers than against them.
Audits can be stressful but most of that fear comes from urban legends. For the most part, if you are audited, you might never even see a CRA agent; they may just ask that you submit supporting documentation.
FBC, Helping Canadians Business Owners Stay Financially Fit
There are a lot of legitimate reasons why Canadian small business owners get audited. There are also a lot of myths surrounding tax audits.
One of the best ways to reduce the likelihood of getting audited by the CRA is to work with tax professionals that understand the CRA and your specific industry. FBC has worked exclusively with small business owners, farmers and independent contractors since 1952.
The tax experts at FBC will help you every step of the way, from tax planning, to filing your tax return, meeting all deadlines, and being with you in the unlikelihood you get audited by the CRA, all included at one yearly fee.
For more information on FBC and the services we offer, call us today at 1-800-265-1002 or submit an online form and an FBC tax specialist will contact you at your earliest convenience.