navid asked in Business & FinanceTaxesCanada · 1 decade ago

Why might you be audited by CRA?

CRA= Canada Revenue Agency

4 Answers

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  • 1 decade ago
    Favorite Answer

    Also the CRA uses software to highlight files to be audited. Out of line expenses will be followed up on. My ex-gf was a high paid nanny and her employers were frequently audited because their child care expenses were much higher than the average family.

    Salespeople are frequently audited for their expenses against commissions or vehicle deductions claimed.

    In my case I reported really high foreign taxes paid, and was asked to provide my US tax returns as proof of the taxes.

  • 1 decade ago

    Having attended CRA seminars, as you can imagine, you may be audited for many reasons. A good place to start is

    http://www.cra-arc.gc.ca/tax/business/sme/audits/s...

    which gives CRA's reasons for selecting small or medium businesses for an audit. Selection of personal files are done similarly. CRA also has a "report it" phone line which I suppose is included in "outside sources". On personal returns, if an item, say medical expenses, are high compared to income, CRA may request additional information.

    Keep in mind that with web filing, receipts aren't sent in unless they are requested.

    To ensure that you come out unscathed by penalties and interest, ensure that you have paperwork to justify your expenses and play by the rules.

  • LaLa
    Lv 6
    1 decade ago

    Just to add...

    Although you are required to report all income, many people in the service industry choose to either not reports tips received or a very small amount like 10 or 15%. CRA may audit these restaurants/businesses and go through debit/credit card transactions to get a more accurate report of any tips received on these cards.

  • DeeDee
    Lv 6
    1 decade ago

    If there is a substantial change in any items, i.e. income, deductions, dependents, etc. These are red flag items, unless the computer randomly picked you out, which can also happen.

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