CRA audits can be intimidating but they are a fact of life for most taxpayers. The Canada Revenue Agency (CRA) may conduct an audit of a business or individual for no apparent reason. In most cases, a CRA audit can only be done four years after a tax return has been filed. Some cases, such as those involving alleged fraud or misrepresentation, can stretch back even further in time if the review is not limited in time. Generally, records should be kept for at least six to seven years.
Most audits are performed to see if the individual has paid enough taxes. If the CRA suspects a taxpayer of fraud or intentionally seeks to avoid paying taxes, the CRA’s Criminal Investigations Program (CIP) may initiate a criminal investigation.
How Frequently Does the CRA Conduct Audits?
If there is inconsistency in your reporting, it may trigger a review and assessment from the CRA. The amount of income, deductions, and credits recorded on a return are examined during an audit to ensure that they are reported correctly. If the CRA notices a discrepancy or error, they may request additional information.
The audit process focuses on more than just one year of a payer’s tax return. CRA audits can be performed for a variety of reasons, including:
- The likelihood or frequency of tax return errors.
- Noncompliance with taxes due.
- In contrast to other audits, investigations, or similar files
- Non-compliance revealed through a government investigation or an outside source.
Furthermore, CRA may:
- Audit someone who is financially connected to someone already being audited, such as business partners
- Organize an audit of a group of businesses or individuals to enhance compliance within the group.
Criminal Investigations
The CRA often launches criminal investigations after obtaining information from a variety of sources, including:
- Law enforcement data from a variety of agencies;
- Sources of public information, such as the media
- CRA referrals, including referrals from previous audits;
- Informant leads provided to the CRA by individuals;
Investigation Types
Investigations by the CRA are most likely to involve the following:
- International cases of significant tax evasion
- A significant amount of income tax or GST/HST evasion
- Investigate tax evasion cases involving money laundering and terrorist financing in collaboration with other enforcement agencies.
- Organizers of sophisticated tax schemes that defraud the government
The help and guidance from experienced tax professionals will ensure the best possible outcome in resolving your tax problem quickly and efficiently. If you need assistance with tax planning, CRA tax dispute, or other tax issues, please do not hesitate to contact us.
