After The Tax Audit

by Lee
(Canada)

I have a client that (prior to me taking over the books) was audited by the CRA. He received a Notice of Reassessment for 3 years with a large tax payable.

The client has expenses for the years in question that he never brought up to CRA auditor at the time of the audit.

Can I still do a T1 ADJUSTMENT at this point in time for the selected years? (2007, 2008, 2009).

Or is there a different route that must be taken now since it was already re-assessed after an audit.

Hi Lee,

It is my understanding that once the Notice of Re-assessment has been issued after an audit, you either pay the tax bill or begin the objection/appeal process.

Of course the best and smartest thing to do ... in hindsight for your client ... is to provide backup and source documentation for expenses during the audit.

What many people don't understand is signing their tax return means they are stating that the information being submitted is complete and true. You are accepting the burden that everything has been reported accurately and within the legal framework of the law in Canada.

To go the objection route, individuals have 90 days from the mailing date of the notice ... or 1 year from the due date of the return ... whichever is the later date ... to file the objection. Everyone else only has the 90 day option.

If your client goes the pay taxes owing route, it is possible to negotiate a payment schedule with CRA. Your client should initiate contact rather than just ignore the situation. It won't go away.

In my chat on what to do if you receive a tax audit notice, you will see a link to a Ken Davidson, CA article on 5 steps to get you through a Revenue Canada audit.

You could also phone CRA ... or try this website I like ... barretttaxlaw.com. They give free consultations.

It always breaks my heart when I hear / see stories like this. It could most likely have all been avoided if the small business owner had placed the priority of paperwork, bookkeeping, and compliance further up the list.




P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.