Check out the details about CRA Audit Notice: How Far Back Can CRA Audit and Why Should I Care About It? from this article. Various information about CRA Audit Notice: How Far Back Can CRA Audit and Why Should I Care About It? and other noteworthy details are included in this article.
CRA Audit Notice
Getting a notice of Audit from CRA can be overwhelming. But if the individuals know the right information and what to expect, it can be quite helpful for them. The Canada Revenue Agency is responsible for taxes, benefits, and various programs for the citizens of Canada.
The CRA Audit is a way by which it can be ensured that the business is properly fulfilling its obligations. It is one method to ensure that businesses are implementing the tax laws correctly. This provides a fair tax system for all Canadians.
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What is a CRA Audit?
The tax system is usually based on self-assessments. It means that individuals register their businesses and calculate their taxes at the year’s end. After calculation, the taxes are reported to the CRA by submitting a tax return along with the required payment.
The tax audit is done to make sure that the businesses have calculated their taxes properly. When someone files their tax return, the returns undergo processing to check calculations and basic information. After the completion of this initial process, a notice of assessment is sent to the taxpayers.
The tax audit is a more detailed examination of the records that is usually conducted after the notice of assessment. In the Audit, the CRA first examines the income and expenses reported by the individuals.
These details are then checked with the information that CRA possesses to confirm whether someone has made correct calculations or not. In addition, the CRA also checks whether someone has reported their revenues from all sources or not.
In the case of GST/HST Audits, the CRA ensures that the tax is collected and reported on all the taxable supplies and the claimed credits are supported by valid receipts.
After the completion of the Audit, one of these 3 things will be determined –
- The previous assessment was correct
- Need to pay more taxes
- Entitled to a refund
In most cases, the audit determines that the individual needs to pay taxes to the government that they owe.
CRA Audit Process
Firstly, an official of CRA, known as the Auditor, contacts the individuals through mail/phone regarding the audit and location/date/time of the audit. Usually, the audit is conducted at the residence or at a business place. When the auditor arrives, they usually present a valid ID Card.
On-site audit offers faster processing, as the questions and supporting documents can be presented quickly by the individuals. If the audit is not on-site, it will be conducted at the CRA office. For this, the individuals will be asked to bring all the supporting and necessary documents/proofs with them.
The time taken to complete an audit depends on –
- records
- audit scope
- missing records
- consultation with tax specialists
The auditor usually makes copies of the supporting documents or, sometimes, can even ask to borrow them for a while by giving a valid receipt. Once the information is verified, the document will be returned.
How Far Back Can CRA Audit Go?
Generally, the CRA can audit for about 2 to 3 previous tax years. It means that individuals should keep all the necessary documents or records with them at the time of audit.
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However, in some cases, the CRA can also ask for more older records/documents. This usually happens when CRA suspects or finds out that there are some issues or frauds with the records or returns. In these situations, they can audit as far as it is required.
Why Should I Care About It?
When someone receives an Audit notice from CRA, they should at least learn the process and their rights. This can significantly help them in certain situations. Furthermore, people should care because it might be possible that they owe money to the government.
Most people don’t review their calculations after filing their tax returns. Sometimes, it is possible that they can get refunds. The CRA decides to send a notice of Audit on the basis of a risk assessment. More information about why there is an audit, its process, responsibilities and rights, and other related things can be learned through the official website of the CRA.