The Canada Revenue Agency, or Agence du revenu du Canada (CRA), administers tax laws for the Canadian Government, the majority of provinces and territories, numerous social and economic programs, and international trade legislation.
When dealing with CRA agents, it is important to choose your responses with extreme care. Otherwise, it could potentially open you up to further investigation.
1. Providing Too Much Information
When a CRA agent asks a question, the answer they receive should only address the specifics of the question, and no more. Anything else you say can expand the scope of the investigation, as your answers open the door for further follow-up and explanation. When answering questions, be concise and to the point with no extra elaboration.
2. Having Multiple Representatives
It is best to have one single point of contact between yourself and the CRA. Having multiple representatives dealing with the CRA on your behalf can easily lead to conflicting answers to CRA questions. It can be extremely difficult to avoid this with multiple people talking to CRA, as even seemingly-minor contradictions can create new issues.
3. Expanding the Scope of Investigation
We have seen cases where CRA agents have asked questions outside the scope of the current audit. Examples would include questions about years not under investigation, or associated businesses not currently being audited. Using an experienced representative such as Gary R Landa, CA Professional Corporation can advise you if you are required to answer such questions or provide information outside the scope of the audit. If you do answer, your answers become part of the investigation and potentially expand its scope to include the topics of discussion.
It is highly recommended that your representative have strong knowledge of the Income Tax Act such as Gary Landa. Many accountants know accounting and transfer information from a financial statement to a tax return but may not know the rules. A representative who does not know the Income Tax rules and has experience negotiating with CRA may give too much information to CRA and could result in a reassessment by CRA.
4. Misunderstanding the Intent of Questions
Seemingly-innocuous questions posed by CRA agents may have much deeper intent. Negotiations with the CRA requires understanding not just the answers to questions, but why those specific questions are being asked.
If you are a business owner and require the help of a professional to negotiate with CRA on your behalf, Gary R. Landa, CA Professional Corporation is ready to help. Contact us today to learn more.