CRA Payroll Audit Preparation Tips
The CRA has a wide range of powers and an audit can be frightening. Nobody wants to be audited, but it doesn’t have to be a nightmare. Here is how you can survive a CRA payroll audit.
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How to Prepare for a CRA Payroll Audit
If you operate a business or are responsible for any of the financial actions of a business, a CRA payroll audit can be a scary thought. The Canada Revenue Agency (CRA) can be incredibly difficult to deal with even when they’re not auditing you, so when they are it’s natural to get worried.
However, one of the keys to surviving a CRA payroll audit is to be prepared. The agency may not necessarily be auditing you because it believes you’ve done something wrong. While the CRA does conduct audits if there are indications of non-compliance with tax obligations, it may also conduct an audit if a higher than usual potential for tax return errors exists, or if similar businesses report significantly different numbers. Certain industries may be audited more frequently, and some audits are even conducted at random.
No matter why the CRA is conducting the audit, it’s critical that you remain calm and prepare yourself for the audit.
Being Prepared for a CRA Payroll Audit
One thing that the auditor will expect to see is that you have your business records in order. If you are selected for a CRA payroll audit, you’ll need to make sure you have all relevant documents on hand. This information may include:
- Prior year tax returns
- Property database information
- Invoices and receipts
- Bank statements
- Payroll deduction remittances
- Adjustments made by your bookkeeper or accountant
The auditor may request specific information prior to the audit. If you have all your documentation available and organized, you’ll make it easier for the auditor to conduct the audit which, in turn, will give you a better chance of successfully surviving the audit.
While you may be nervous and apprehensive about the audit process, you’ll want to cooperate with the auditor. Making it difficult for them to complete the audit won’t help your situation but being open and cooperative will likely make the CRA payroll audit processes smoother and easier for everyone involved. Working with a professional who will represent you during the audit will ensure professionalism.
Types of CRA Payroll Audit Processes
When the CRA decides to conduct a business audit, the auditor may wish to conduct the audit at your place of business. This is called an on-site audit. If this happens, the auditor will set a date for when they will conduct the audit. When the auditor arrives at your business, they will present you with valid identification and then begin the audit. They may wish to tour your business and might request to speak with some of your employees. The auditor will likely also need a quiet desk to conduct the audit.
However, the auditor may request that the audit take place at the CRA offices instead. This process is called an office audit. If this is your situation, the auditor will likely request that you bring specific documents with you, such as detailed payroll information. The auditor may request to borrow some documents to complete the audit over a period of time. If this happens, they will give you a receipt for all documents you provide. You may be able to submit documents online as well.
When the CRA Payroll Audit is Complete
If the auditor finds any issues during the audit, they may discuss them with you prior to the completion of the audit. Once the auditor has examined the documents and the audit is done, they will inform you of the next steps.
The auditor may determine that the initial tax assessment is correct and nothing else must be done. If this happens, you will receive a completion letter and the audit will be over.
The auditor may also find that your return needs to be reassessed. If this happens, you will receive a proposal letter explaining the reason for the reassessment and you may have to pay additional taxes. If you disagree with this reassessment, you can file a formal objection. This should be done with the help of an experienced professional.
The team at Farber Tax Solutions can help you during every step of the CRA payroll audit process. Our team can communicate and negotiate with the CRA on your behalf, represent you during the audit, and formally object to the audit results if this is needed. For more information, please contact us today.
Farber Tax Solutions can help you successfully deal with CRA problems. We utilize the experience of our tax experts to:
- 1| Offer a comprehensive solution that is focused on achieving the most favourable possible outcome for your tax issue;
- 2| Communicate with the CRA on your behalf and navigate the entire CRA dispute process; and
- 3| Offer a complete solution to your tax problems, including ex-CRA professionals and tax lawyers from Farber Tax Law.