Do you want to learn how to reduce risk of being tax audited? Tax audits are a legitimate concern for everyone. However, your risk can be greatly reduced by avoiding key audit triggers such as reporting consecutive years of business losses and making high expense claims. Additionally, you should also ensure that you have supporting documentation for your expense claims.
What are two words more dreadful than income tax? That’s right, its tax audits.Hi, my name is Allan Madan, your trusted accountant, and here I will help you minimize your odds of getting audited by the CRA. The most common question my clients ask me is the following.
What Are the Chances that I Will be Audited?
Well, the answer depends on whether you have these audit triggers:
- Reporting consecutive years of business losses.
- Reporting rental losses from a property because you charged below market rents or you are claiming excessive repair costs.
- Making high expense claims form employment such as home office expenses, vehicle expenses, and travel.
- Significant changes in your income from year to year.
- Claiming large losses on the sale of stocks, investments, and real estate.
Avoid these audit red flags if you can. In addition here are few practical ways you can lessen your audit risk.
- Make sure the expenses you claim are reasonable and supportable.
- Ensure that you have proper supporting documentations like receipts for these expense claims.
- Avoid aggressive tax saving schemes advocated by tax promoters.
- Finally, file a tax return online. For self employed individuals the deadline is June 15th, and for everyone else it’s April 30th.
While it’s impossible to completely prevent yourself from being audited, avoiding the audit triggers talked about and taking the practical steps discussed above will greatly lower your audit risk.
Thanks for reading this article about how to avoid being tax audited. For more tricks and tips, make sure you check out the rest of our website. Also, get access to a free report, ‘20 Secrets on How to Beat the Tax man’.
The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.