The Red Flags for a Tax Audit in Canada
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Whether you’re self employed or running a million dollar company, everyone in Canada has to declare their taxes. The business tax reporting process is intricate, and if not done correctly can lead to problems, tax audits being one of them. We’ve compiled some common reasons for business tax audits in Canada and combined them into this beautiful infographic.
Red Flags for an audit in Canada. Canada Revenue Agency wants to ensure that you have declared all income and that expenses are all business related. They can even compare your business expense with others in the same industry.
1. You Reported Large Changes
Substantial changes in your return from one year to another will certainly raise questions.
2. You Show Continuous Losses
Reporting lossess from a business for several years will raise some flags.
3. Comparison
If you are reporting income of $50,000 a year and livng in a neighbourhood where the average is $200,000 a year, it may look suspicious.
4. You Report Large Expenses
Claiming of significant expense will cause an enquiry. Canada Revenue Agency will then request receipts to ensure that the deduction is legitimate.
5. Aggressive Tax Planning
If you have participated in tax shelter, donation scheme or other aggressive tax planning, you will be audited.
6. Other Suspicious Expenses
Your must keep log if you are claiming automobile expenses.