The CRA will also receive information from other audits and even anonymous tipsters. Yes, there is a leads program for suspected tax/benefit cheating. In the case of offshore cheating, the reporter can earn a reward, provided the CRA website collects $100,000 or more in federal tax owing (excluding penalties and interest). The reward is between 5% and 15% of the amount collected and—you guessed it—that money is taxable income.
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What documents can an auditor ask for?
A tax auditor with the CRA can request personal records that can include prior filed tax returns, your credit history, details of any property you own, as well as mortgage and/or banking and credit card statements.
The CRA can also request the personal and/or business records of your spouse or common-law partner, and other individuals in the family or other entities that are not being audited. That can include family members, corporations, partnerships and trusts, including the settlor, beneficiary and trustee.
If you own an income property and/or a business, expect to produce ledgers, journals, invoices, receipts, contracts, rental records and bank statements. In addition, any adjustments made by an accountant or a bookkeeper can be requested. Further information can extend beyond the receipts and bookkeeping, however.
If you own a rental property, check out Form RC 685 Refund Examination Program Rental Information when you are filing your tax return. This will provide you with a good overview of the breadth of information the CRA can require to release any tax refund they may owe you. It’s also a good guide to use in preparing for a tax audit down the line.
A similar process is in place for business owners. In this case, take a good look at Form RC683 Refund Examination Program – Business Information. Be prepared to justify your tax filings to correspond to your business plans and the purpose of any capital assets you acquired. That may also include your regular customers, your business location, and extensive details about family members and tax accountants who work(ed) for you.
Get ready, grab your receipts
Tax season starts officially on February 24, 2025, the day the CRA will accept electronically filed returns. But despite digitization, filing a tax return (if only to collect on social benefits and tax credits) requires honest self-assessment and meticulous record-keeping.
Without this, penalties, interest and the significant financial stress that come with this can be on your horizon.
