Those brown envelopes with the little black Canada flag in the top left corner can raise the heart beat a little. Sometimes they contain a cheque! Other times you rip it open and it's a letter with a bunch of text that looks like it was written in code.
These little mini-audits are called process reviews and can occur for various reasons. They happen more often than you think and are getting more frequent every year. We deal with them every day and it’s part of our job to take care of them with as little bother to our clients as possible.
So what do you do when you get one of these brown envelopes?
If it’s a cheque, cash it. If it’s a letter, please send it to us, or your accountant immediately. The Canada Revenue Agency may be requesting some specific documents and they only give you a short window to respond.
They might be asking for your donation and medical receipts, or maybe the bill of sale for the vehicle your corporation bought a couple years ago. Either way, it’s important to respond to them.
Extensions can always be requested, but are not promised. If you’re unresponsive, the CRA may just assume the worst case scenario and send you a hefty tax bill with extra penalties and interest that you might not have owed had you sent them the proper info.
What do you do when the CRA calls you?
Tell them to call your accountant. If they object, say you have to go and will call them back. Then call us and we can call them back.
There are a couple of reasons we recommend this. First, it’s possible that the phone call is a scam. The scam calls are getting more and more frequent and harder to distinguish from a legitimate CRA agent. Don’t give them any information.
Secondly, legit CRA agents often seem to speak another language, using terms and phrases that you don’t hear every day. There is always a risk of miscommunication or simply providing the wrong answer because of a misunderstanding, which could cost you. We don’t want that to happen to you. Wrong info can be reversed, but it can take as long as a year to resolve simple mistakes. We know how to deal with the CRA, so please, leave those discussions to the pros.
How to avoid full-blown audits?
These CRA Process Review letters usually give you 30 days from the date of the letter to respond. If these little requests or questions aren’t handled properly, it may make the CRA agent suspicious which can lead to an actual audit - which no one wants. We are very diligent about responding to every CRA inquiry immediately. We are also super familiar with what’s allowed and what’s not.
If we do your taxes, you know we are adamant about actually getting copies of all your medical receipts, official donation receipts, equipment purchase invoices, etc. We know what will be requested and we scan them in to our system so they are convenient to access when the CRA agent comes knocking.
What is CRA Representation?
Need CRA support? True North Accounting acts as the representative for all our clients. We are on file and able to handle pretty much anything the CRA needs for your tax accounts. We provide audit support to our bookkeeping and tax clients so they can sleep well at night knowing where they stand with the tax man. Just by being responsive, polite, and doing our work properly, we can prevent 95% of audits.
Give our CPAs a call for a quote if your accountant doesn’t stand behind his work.
Read more about Corporate Tax topics that may be helpful to you and your small business.
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