Monday’s= Small Business
I am often asked how people get audited by CRA. I would suggest that the most popular way that this happens is because someone calls CRA and tells them that you are doing something wrong. Disgruntled customers, employees and former spouses are all good examples of the type of people who would look forward to causing you trouble.
The second most popular method would be to owe the government money. This method works very well for payroll audits – fail to pay a couple of months source deductions and you will have a payroll audit pronto.
The third common method is that something does not look right on your return. CRA has a number of analytical programs that compare your expenses with similar businesses and also with the amount of revenue you are earning. So if your expenses look different than they are expecting… generally you would be asked to provide the receipts to back up these expenses. This is not a full audit, but it can lead to a full audit if CRA does not like what it sees.
An audit with CRA can be an unpleasant experience. Even when there is nothing wrong with your returns or your records the audit itself is a time consuming process you would rather avoid.