(Originally posted on September 6, 2015)

 

Handling a CRA Audit, Part 1 – The Audit Process

 

We live within a self-assessment tax system; that is, we tell the CRA what we earned, the deductions we are taking and the tax credits we are utilizing. The CRA then tells us the amount of tax we owe based upon the information that we sent them.

It is this self-assessment type of tax system that gives CRA the right to Audit selected taxpayers to ensure that each taxpayer is paying the amount of tax that they are supposed to.

Although the level of compliance with the Income Tax Act in Canada is high compared with other nations, CRA still conducts millions of audits each year and recovers huge amounts of unpaid taxes, interest and penalties.

Last month we discussed what triggers and audit, this month we will try and show you how to survive the Audit, if you should be selected.

(Originally posted on August 3, 2015)

 

What Prompts a Tax Audit?

For some, it is their greatest fear, for others, a fact of life. The letter from CRA saying they want to review your tax returns.

There are only 2 ways that a taxpayer can be selected for an audit:

  1. Random Change
  2. Targeted Selection Process

We’ll ignore random chance and give you the details for the Targeted Selection Process (TSP).

The TSP is based upon risk factors; the CRA looks for those that are more likely to owe more taxes based upon some specific criteria and experience:

10% of randomly selected taxpayers face an additional tax bill of more than $5,000 while 35% of TSP taxpayers owe more than $5,000 in additional taxes.

(Originally posted on July 29, 2015)

 

Common Business Killers

It is common knowledge that 85% of new business start ups fail within their first 5 years; 90% within the first 10 years. There are a number of ‘common business killers’, when overlooked, these items may lead to the demise of your business:

Lack of Planning: Every new business owner tends to react to each situation or set of circumstances as they arise, without the advantage of a plan, the business owner will jump from crisis to crisis without control or consistency, causing undue stress and teaching employees to operate in the same reactionary form.

A plan should be designed to increase the chances of success, while reducing the likelihood of failure. The plan should take into account the ‘what if’ scenarios and indicate a response to the problem and an efficient and reasonable solution, essentially indicating the competitive advantage of the business thorough differentiation and values.

(Originally posted on July 29, 2015)

 

Allowable Business Expenses

One of the first questions asked by a new business owner is “What can I claim as business expenses?”

Under the Income Tax Act, there is no true definition of what constitutes an allowable deduction against business or professional income. Essentially, any expense incurred directly related to the operation of your business or in direct relation to earning professional income is an allowable deduction. It would be impossible to list every deduction allowed in computing business income, because in theory, any expense incurred for the purpose of earning income is deductible. There are certain restrictions and exceptions to this guideline.

(Originally posted on July 24, 2015)

 

Ledgers (Coquiltam) Presents at Chamber of Commerce Luncheon

Lea Latham, Ledgers (Coquitlam) along with Matthew Bennett of Intuit made a presentation on the benefits and features of QuickBooks Online for members and guests of the Coquitlam Chamber of Commerce yesterday.  Lea says “it went very well and I believe I got several client leads from it, Both Matt & I were very pleased with it.”