Avoiding a Red Flag When Filing Your Business Tax Audit

A business tax audit involves many different things beyond the preparation of a tax return. An auditor will examine all records relating to a taxpayer’s financial data in order to verify that all pertinent records regarding a taxpayer’s personal information have been properly kept and maintained up to date with accurate information and without any errors. This includes a look at bank accounts, credit card statements, bank deposit slips, cancelled checks, stock trading slips, and any other financial records that might be required in support of a tax return request. The audit usually concludes with a repayment request to the concerned agency or the receipt of a check for payment.

The Ultimate Guide To Avoiding A Red Flag When Filing Your Business Tax Audit

Business tax auditors are licensed by the Canadian Revenue Agency in order to administer examinations related to the preparation of a tax return. It is not uncommon for them to also conduct interviews with taxpayers. While most people are aware that audits take place, not everyone is familiar with the types of questions that are commonly asked during these examinations. It is important to remember that these exams are performed in order to ensure the accuracy of a taxpayer’s submissions regarding their incomes, expenses, and any other information that could potentially affect the validity of a tax return. The tax professional will most likely ask you a variety of questions related to your personal and business finances in order to determine whether you met the requirements to receive a refund or not.

One of the most common questions which are typically asked during a business tax audit is why you made certain choices regarding deductions, rebates, and expenses. While the audit is examining your records it is important to remember that they are only looking to confirm your statements. If a client’s statement is going to be denied due to an unexplained document it may help you save face if you can point out that you gave your clients an explanation for all of the facts that were missing from their records. While some clients may try to justify their actions to the auditor by telling lies, it is important for you to be completely honest when speaking with them. Doing so may actually cause the audit to go in your favor as most people have no idea what deductions they may be entitled to or how to claim them on their tax return. While it is always best to be upfront and honest about every single piece of information, it may be better to ask for clarification on questions instead of attempting to fabricate any numbers in order to get through to the tax man.

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