Are you concerned about being audited by the CRA?

Here are some Tax Red Flags CRA uses to select files for a tax audit or review.

1) Overstating your business expenses

While you should claim all your expenses, there is usually a point where it can start to do more harm than good, at that point it may be worthwhile to scale back. Throughout the years, I have encountered numerous examples of this, and accountants will provide specific advice based on your specific circumstances.

2) Revenue discrepancies or having a Hobby Business

Your reported income doesn’t match the information 3rd parties have provided to CRA.

Hobbies are businesses that never make any profit and are not intended to make any profit.

3)Claiming 100% business use for a vehicle

You cannot claim 100% business use for a vehicle, especially if you only have one car in your family unit. CRA will never believe that you only use the vehicle for business and not to go shopping and to the movies.

4) Claiming large charitable contributions

Did you know that donations can be claimed in full by either adult person in the family unit, regardless of whose name is on the receipt. This also provides for a larger reduction in overall combined taxes payable (and YES we can tell you exactly how much each person’s share would have been if you need it)

5) Claiming significant medical expenses

Same here as with donations, all the families medical expenses can be claimed by either adult in the family unit, however to get the most tax savings it is “usually” most beneficial to claim medical on the lower income earners tax return - but not always!!

6) Did you know that smaller businesses receive the majority of CRA tax compliance resources?

CRA tends to scrutinize self-employed individuals more closely because of the tax benefits that can be generated from being self employed.

To make your review or audit as smooth as possible, ensure you maintain very detailed records such as in a program like QBO where documentation proving your claims will always be available and working with a tax professional is also advisable.

Until next time,

Christine Walters