I am an IT contractor Incorporated in Ontario. I have been pretty careless past few years when it came to my taxes and completely trusted my accountant for balancing the books, etc.
Recently when I was looking to refinance my mortgage; I found that my company is supposed to have around 250,0000$ in retained earnings. However when I look at business bank account; there is barely 15,0000$. All the money was withdrawn by me; but seems that my accountant did not declare the personal income properly (he would declare 50k whereas I would have taken 150k) and hence I have this big discrepancy. I spoke with him and he advises that we will pay more taxes in coming years and may be take a directors loan and balance the books in two-three years.
However I am afraid that if CRA comes for audit; We will be in trouble. Should I take a personal loan and go back and get all the taxes amended for previous years? Or may be take the loan and withdraw 250k as mix of Salary and dividend this year? Will this raise any red flags for CRA?
His other option is to close the corporation. I don’t understand how that will get me off the hook from this 250k
What do you suggest?