As Canadian, you need to follow a voluntary tax system for income tax filing. ?This return is requested by the CRA annually.?It is commonly referred as the annual taxation or tax return.
CRA receive and handle the tax returns and provide taxpayers with notice of assessment. One of the most essential portion of this system is a requirement for the taxpayer to maintain the records which may be required in order to substantiate the tax filed.
Why CRA do the tax audit
The CRA or the Canada Revenue Agency is responsible to handle more than 25 millions of individual returns as well as corporate returns every year. Their prime jobs are to process these returns and to verify and assess the returns. Most of the time, CRA also looks for something abnormal in comparison to past tax returns filed by taxpayers.?Each year about one or two percent of the returns are chosen for the annual audit.
CRA can re-assess the tax return or known as CRA tax audit:
- In case of fraud or the misrepresentation, the CRA may reassess the tax return without time limitation.
- CRA can reassess the tax return at any time within four years after the first reassessment is sent.
The CRA can conduct desk audit where they may ask you for submitting the required documents that are related to the tax returns. CRA may also visit the business place of taxpayer in order to examine the records. This is also known as the field audit.
Apart from this the CRA has the authority to inspect and audit the books and the records that belongs to the taxpayers. They can even enter into the business premise to conduct the audit. If they find any resistance, CRA may issue a demand letter for submitting the information or the records.
CRA tax audit outcomes
The CRA auditors are also responsible to issue proposal of the tax audits. They have to compare the result with the original record for tax return. If they are sure that the original record for tax return have ?some errors, they may send the proposal letter. This proposal letter often includes suggestion to change the original tax return submitted and also asks the taxpayer to provide further proof. The proposal letter also includes a deadline to submit the required information. Generally, the CRA use to offer a 15 to 30 days deadline for collecting the information from the taxpayer.
From a taxpayer perspective, he or she is required to make some attempts in order to come to the resolution with the auditors from CRA. Usually, a settlement with the CRA officers can be done. However, it is important for you to know that dealing with CRA tax audit requires expert advice.
If CRA are not satisfied with the new information submitted by the taxpayers, then they may issue the reassessment letter.
The notice of reassessment means that CRA believe that there is an amount owing along with the interest.