Audit triggers and how to avoid them.pptx

🚨 CRA Audit Triggers and How to Avoid Them 🚨

Ever wondered why the CRA audits? 🧐 Discover the reasons behind these checks and learn to steer clear of common pitfalls.

📋 Why does CRA audit? Understand the key reasons behind these audits and how you can stay compliant.

🚫 Refusing (or forgetting) to provide more information Missing details can raise red flags. Always provide complete info!

💸 Claiming unusually high credits or deductions Don't exaggerate deductions. It can attract unwanted attention from the CRA.

🏠 Home office deductions that are through the roof Keep your claims reasonable to avoid scrutiny.

🚗 Writing off 100% of your vehicle This can be a major red flag. Be mindful of your vehicle write-offs.

🏘️ A rental property that keeps losing money Consistent losses can trigger an audit. Ensure your claims are accurate.

👨‍👩‍👧‍👦 Over-paying salaries to spouse and kids Fair pay is crucial. Over-paying family members can be suspicious.

🔑 Key takeaways and conclusion Summarize the key points to stay audit-free and ensure compliance.

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2. CRA audit triggers and how to avoid them By Lakshay Gandhi CPA 647-987-4025 [email protected]

3. Why does CRA Audit? Many reasons! Random selection, Tax history or types of deductions claimed. It’s important to report all of your income on your tax return. If you are self-employed, be sure to implement good record keeping Xero, Quickbooks and Wave accounting softwares

4. 1. Refusing (or forgetting) to provide more information

5. 2. Claiming unusually high credits or deductions My client had claimed a big capital loss because they had forgone the deposit. Second example is claiming HELOC interest created a big deficit and tax refund. This reporting of loss triggered an audit

6. 3. Home office deductions that are through the roof A home office that takes up 10% of your home’s floor space seems reasonable. A home office that takes up half of your six-bedroom home seems unrealistic and may trigger an audit. When calculating what percentage of your home is used for your business, or WFH office space, be precise based on square footage.

7. 4. Writing off 100% of your vehicle If you own a parking garage and buy a snowplow , the CRA may not raise an eyebrow if you write-off the entire purchase as a business expense. If, however, you attempt to write off 100% of the family sedan , the CRA may have a hard time believing you don’t use it to take the kids to playdates and soccer practice.  The same logic applies to vehicle-related expenses: be precise, be reasonable.

8. 5. A rental property that keeps losing money Do you own a rental property, like a condo, or rent out the basement apartment in your home? It’s possible your expenses may exceed your rental income. In a year of extensive repairs or a prolonged vacancy, for example, claiming a loss is acceptable. When losses occur for consecutive years, however, the CRA will likely take notice. Similar logic applies to business continuously loosing money

9. 6. Over-paying salaries to spouse and children Over-paying salaries to spouse and children – it should be market rate Dentist office paying admin $50/hour to claim children’s salaries. 3,000 in travel expenses moving to 10,000 in following year – Big jump

10. Key takeaways Limit questioning to three people: you, your bookkeeper and your public accountant. Before the audit begins, you need to pinpoint:  which taxation years are being audited which business is being audited (if you have more than one) what specific records the auditor wants to see.   Auditors may request documents be submitted on-line through Canada Revenue Agency’s “My Business Account” secured portal. CRA will not use e-mail, because it is not secured. Audit responses can be as big as 300 pages.

11. Thanks for listening! Any questions?