As far as tax audits go, it’s not always a question of guilty or innocent, but regardless, they can be an incredibly stressful and intrusive ordeal to go through. Usually, audits occur because something you reported doesn’t match what the tax agency expected, so they desire to dig deeper. An audit doesn’t necessarily mean you owe more money. If you were honest on your taxes, the amount of time and financial expense needed to prove this can make being audited an extremely unpleasant and costly experience, even if the audit doesn’t find anything.

Audits are one way the CRA ensures Canadians follow our country’s tax laws. The CRA conducts tax audits to minimize the difference between what the CRA is owed versus what they receive. Most audits conducted by the CRA are of small and medium businesses (SMBs), with the GST/HST audit forming the majority of all audit types. The CRA spends over half its yearly budget tracking and auditing SMBs, almost double that of large international businesses.

For an individual, it is unlikely to get audited unless there are apparent signs of fraudulent behaviour or significant discrepancies in reported income year over year. Sometimes a CRA audit is random, but they will often select taxpayers based on specific activities or audit triggers. Knowing these triggers and behaving accordingly can help you or your business avoid an audit altogether.

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