When the Canada Revenue Agency comes knocking, it’s best to be prepared. The CRA meticulously reviews tax returns, particularly those filed by small businesses and self-employed individuals. As a result, you are more likely to be audited than someone who works. Here are some suggestions list by tax accountant Toronto team for avoiding an IRS audit.

Ensure All Your Revenues Match

The most common error that leads to trouble is having revenue discrepancies. The CRA will verify the income from various sources, including what’s reported on your GST return, your spouse’s return, and other data provided by your employer. An audit may be requested in the event of a mismatch.

Ensure The Profit Margins Are Reasonable

If you report income that is far outside the norm for your sector, the CRA may come calling to do an audit. The Canadian Revenue Authority has done a lot of study on company profits in every sector in order to determine whether there are any irregularities with your tax return.

Avoid Deducting Large Business Expenses

Many business owners will take advantage of the tax deductions that come with eliminating business expenses from their income. However, tax accountant Toronto team recommend that you must exercise extreme caution while deducting very large company expenses if you do not want the CRA to arrive at your door.

For example, if you have spent a lot of money on advertising, travel, or other expenses that do not appear to be necessary, the CRA may suspect this is suspicious and demand an audit. tax accountant Toronto advise to avoid deductions for which you are not entitled.

For example, if you are self-employed, you may be eligible for the home office deduction, which allows you to deduct a certain amount of your rent, utilities, and phone costs if you work from home. You may get caught if you take this deduction but don’t devote all of your time to working from home.

Don’t Claim That You Use Your Vehicle 100% For Business

It’s unusual for a person who works for themselves to solely use their car for business purposes. As a result, tax accountant Toronto team recommend that don’t make the error of stating it on your taxes. In order to determine if you have adequate documentation to back this claim, the CRA will need to conduct an audit.

Avoid Recording Personal Expenses As Business Expenses

One of the most frequent blunders made by business owners is failing to differentiate between personal and commercial costs. When auditors check your filed tax returns, this is one of the areas they look for.

Do You Collect A Lot Of Cash?

If you run a business that takes money rather than cheques, the CRA may perform an audit more frequently than in other businesses. Because tax evaders may fail to disclose all taxable income, most people who operate enterprises where they receive money from individuals are audited on a regular basis. This includes home renovation contractors, restaurants, hair salons, and

In the event that you continue to report losses in your business for years, the CRA may request an audit to verify that your reporting is correct.