Canada Revenue Agency (“CRA”) risk assessment efforts are getting more sophisticated. CRA is requesting more disclosure to assist with risk detection efforts to address perceived non-compliance by taxpayers. This is resulting in more CRA audits.
CRA audit activity can cause operational issues (cash flow, time, reputation) and financial statement uncertainty. Preventing or mitigating such activity reduce these impacts. That’s where the expertise of a seasoned tax disputes and litigation lawyer can help.
Here are 5 things to consider:
- Be excellent with your compliance. File tax returns on time and accurately (especially the General Index of Financial Information). Compliance feeds into the data analytics and risk assessment models of CRA – incomplete or inaccurate reporting can lead to audits whereas accurate reporting may reduce your risk profile.
- Filing accurately and on time isn’t enough – be sure to meticulously document all tax planning, execute steps properly and maintain good records. If you are audited, be sure to understand CRA’s objectives at the audit stage. Missing information or poor execution can result in sizeable tax liabilities including compound interest and penalties.
- Generally, reassessments are expected to be generated at the audit stage. Where possible, seek a settlement at this stage and document it within an “Audit Agreement”. Appeals and objection rights will have to be waived, but you will have certainty.
- Tax authorities are keen to turn objections around quickly to reduce the delays in this process. This can be a double-edged sword, but a settlement may be possible.. Be sure to seek interest relief.
- Consider filing an appeal to the Tax Court – it may be the most appropriate resolution avenue for significant or contentious issues. This can also be quicker than other dispute resolution mechanisms and should be a serious consideration on next steps. Any settlement at this stage will be at least as good as at any prior stage.
For more information, contact Justin Kutyan at 416-777-3266 or [email protected]