*Introduction:*
As taxpaying citizens, it is natural to feel trepidation when mentioning the words "CRA audit" and "reassessment." The Canada Revenue Agency (CRA) administers tax laws and ensures taxpayers comply with their obligations. While an audit may sound intimidating, it is essential to understand the process and navigate it confidently. In this blog, we will delve into the intricacies of CRA audits and reassessments to shed light on what they entail.
**1. The CRA Audit: Understanding the Basics**
A CRA audit examines a taxpayer's financial records and activities to verify if the reported information on tax returns is accurate and by the tax laws. The agency selects individuals or businesses for audits based on various factors, including discrepancies, anomalies, or random selection.
During an audit, the CRA may request documentation such as receipts, invoices, bank statements, and other supporting documents. It is crucial to cooperate fully and provide the requested information promptly to facilitate the audit process. While audits can be unnerving, transparency and organization will work in your favour.
**2. Types of CRA Audits**
There are different types of CRA audits, and each varies in complexity:
**a) Correspondence Audit:** This is the least intrusive form of an audit where the CRA sends a letter requesting specific documents or clarifications. It is essential to respond within the stated timeframe.
**b) Office Audit:** In an office audit, you will be required to visit a CRA office and provide the requested documents and explanations to the auditor.
**c) Field Audit:** A field audit takes place at your place of business or residence. A CRA auditor will contact you to schedule a suitable time for the visit.
**3. The CRA Reassessment: What Does It Mean?**
After the completion of an audit, the CRA will determine if any adjustments to your tax return are necessary. If discrepancies are found, the CRA will issue a reassessment. A reassessment outlines the changes made to your original tax return, including any additional taxes, penalties, or interest owed.
It is essential to review the reassessment carefully to understand the basis of the changes made by the CRA. If you agree with the reassessment, you can pay the amount owed promptly. However, if you disagree, you have the right to appeal the decision through the CRA's formal objection process.
**4. Dealing with Reassessments: The Objection Process**
If you believe the CRA's reassessment is incorrect or unfair, you have the right to object. To initiate an objection, complete and submit Form T400A, "Objection - Income Tax Act." The form should outline the reasons for your objection and include any supporting documentation.
The CRA will review your objection, and if they find merit in your arguments, they may adjust the reassessment. If the CRA upholds its original decision and you disagree, you can appeal to the Tax Court of Canada.
**Conclusion:**
Facing a CRA audit and reassessment can be nerve-wracking, but understanding the process and your rights as a taxpayer can help ease the anxiety. Cooperating with the CRA during an audit, maintaining accurate records, and seeking professional advice is essential to ensure a smooth audit experience. In the event of a reassessment, the objection process offers a means to challenge the CRA's decision if you believe it to be incorrect. Remember, staying informed and proactive is key to confidently navigating the taxation process.
We are happy to assist if you are going through an audit or assessment or have questions.
Please email us at info@nuages.ca or call us at 416-477-1324.