As the April 30 tax filing deadline approaches, Canadians are facing additional concerns hidden within this month’s federal budget. Ottawa has proposed a significant expansion of the audit powers wielded by the Canada Revenue Agency (CRA) to target non-compliant taxpayers.
This initiative stems from a 2018 report by the Office of the Auditor General, revealing widespread ignorance of information requests from taxpayers. Approximately three million Canadians can expect notices from the CRA, signaling that their income tax returns are under scrutiny.
Understanding the difference between a review and an audit is crucial. A review involves the CRA requesting supporting documentation for specific claims, deductions, or income amounts. Ignoring this request could escalate the situation. While reviews typically focus on validating submitted information and may require documentation dating back six years, non-compliance could result in disallowed claims or deductions.
Tax experts emphasize the importance of transparency when dealing with CRA inquiries. Attempting to deceive or withhold information may lead to reassessment or penalties. The CRA employs undisclosed scoring systems to identify returns with potential inaccuracies, sometimes flagging returns based on discrepancies with third-party information sources.
When a review escalates to an audit, the stakes become higher. Audits involve a deeper examination of financial records and may result in immediate repayment obligations, accruing interest if not settled promptly. Severe cases of non-compliance can lead to wage garnishment, asset seizure, or even criminal charges for fraud.
Various factors can trigger an audit, including self-employment, inconsistencies between income and filings, or suspicions of tax evasion. Recently, the CRA has intensified audits on homeowners claiming capital gains exemptions and landlords reporting rental income losses.
Navigating CRA audits can be complex, necessitating professional assistance. Financial advisors or tax specialists can offer invaluable guidance and potentially uncover long-term tax-saving opportunities by rectifying past errors or omissions.
While enlisting professional help may incur costs, it pales in comparison to the repercussions of disregarding CRA inquiries. As the tax deadline looms, Canadians are advised to ensure compliance and transparency to avoid the consequences of expanded CRA audit powers.
