As a small business owner, the thought of an audit from the Canada Revenue Agency (CRA) may leave you feeling quite anxious. The good news is that an audit isn't the end of the world. With the help of an accountant, like Tony Tiani & Co Inc Prince George, your business can get through the audit without it leading to the demise of your business. Ideally, though, you will avoid the hassle and expense of an audit in the first place. Here are five ways to do just that:
Double-Check Your Return
Discrepancies in your arithmetic may be an honest mistake, but they can still trigger an audit. It's worth the time to double-check your tax return before you file it. If your math isn't quite adding up, you may want to have an eagle-eyed friend, family member, or employee perform their own audit before you file.
Use Tax Software
When you're an employee of a business, filing your taxes on your own may make sense, but as a business owner taxes are simply too complicated. Eliminate the stress of completing your own tax return by hand and invest in decent tax software instead. This can help eliminate obvious errors and issues that may look suspicious to the CRA.
Document All Business Expenses
Claiming a large amount of business expenses can catch the eye of the CRA. If you do claim business expenses, they need to be legitimate (completely related to your business) and documented. You should have copies of all receipts and they should be organized and clearly labeled.
Respond Promptly to Inquiries
If you receive an inquiry letter from the CRA, do not panic. Oftentimes instead of going straight to an audit, the CRA will send you a letter asking for clarification about anything confusing in your tax return. To avoid this turning into a full audit, it's prudent to reply promptly, professionally, and with all requested documentation.
File on Time
While filing late won't guarantee an audit, it does bump up your chances in the same way that any irregularities do. Plus, you will probably be subject to late fees and penalties, which can damage your business financially. If you don't have time to get to your taxes before the deadline, that is a great reason to hire an accountant.
By following these tips, you can minimize your chances of being audited by the CRA. Just to be on the safe side, it's always a good idea to meet with a trusted accountant.