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CRA Audit Penalties and How to Avoid Them

CRA audit penalties can be significant if The Canada Revenue Agency (CRA) audits you and determines that you have either intentionally or unintentionally evaded or averted paying your taxes. It is vital to know how to properly approach a CRA audit. If facing a CRA audit, Farber Tax can help you. Contact us today!

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Dealing with CRA Audit Penalties


No one wants to be called in for an audit by the Canada Revenue Agency. Not only is it incredibly stressful to have to deal with such a situation, but you’re also naturally worried about any CRA audit penalties that could arise as a result of the audit.

During an audit, the CRA examines the records, books, and other financial documents of a taxpayer to confirm if they are following tax law correctly and if they are fulfilling their tax obligations. If the auditor concludes that a reassessment should be made, you could be faced with a balance owing. If you do not pay this balance on time, you will be charged interest. This is one of the possible CRA audit penalties that could come out of the process.

If your return is reassessed and you have a balance owing, the CRA will charge compound daily interest as well as interest on the penalties starting the day after your filing due date, despite the fact that your return was reassessed at a later date. These charges can certainly be very expensive and difficult to pay.

However, this is not the most severe of the potential CRA audit penalties.


The Potential for Tax Evasion Charges


If the CRA determines that you intentionally ignored Canada’s tax laws, you can be charged with tax evasion. This is a crime that could result in you having a criminal record. There are various penalties for tax evasion, including:

  • Significant interest and penalties
  • Additional fines imposed by the courts – the courts may fine up to 200% of the taxes evaded
  • Fingerprinting
  • A criminal record
  • Prison time

Tax evasion is a very serious charge and one of the most severe CRA audit penalties. There are various forms of tax evasion:

  • If you own assets outside of Canada, you are required to report this to the CRA and pay the appropriate taxes on your international income. If you do not, you could be charged with tax evasion.
  • If you failed to accurately report your income for any reason, this could be considered tax evasion. This includes situations where a person purposely fails to disclose income to avoid taxes, as well as situations where a person conspires, counsels, and promotes others to incorrectly report their income.
  • Deliberately misrepresenting your financial situation or making false statements, including those involving tax shelters or other arrangements, can also be considered tax evasion.


Dealing with Potential CRA Audit Penalties


If you are chosen for an audit, remain calm. There are many reasons why the CRA may wish to audit an individual or organization and being selected for an audit does not necessarily mean that you are suspected of a crime. Complying with the auditor’s requests and providing the requested documentation can help you during the stressful audit process.

You will not want to go in unprepared. If the Canada Revenue Agency has started asking questions about your tax situation, it can be extremely helpful to work with a professional who understands the audit process and potential CRA audit penalties that could come out of the process.

The team at Farber Tax Solutions has years of experience in communicating with the CRA and successfully dealing with audits. Our team of ex-CRA professionals, working in affiliation with tax lawyers from Farber Tax Law know how to successfully navigate CRA processes, communicate and negotiate with the CRA. Trust Farber to resolve any tax issues you may have and give you the best chance at avoiding CRA audit penalties.  Contact us today for more information.

Farber Tax Solutions Helps You at Every Step of the Way including:

  • 1| Organizing: We analyze all documents and communication, to fight the CRA on your behalf
  • 2| Audits: We assist you with audits and ensure proper conduct by tax authorities
  • 3| Appeals: We can prepare a Notice of Objection, clarifying your standing with the CRA
  • 4| Litigation: We represent you at all levels of court