Sometimes when the piles of receipts begin to pile up and you’ve accumulated bags and shoe boxes of receipts you begin to think... if I throw in some personal expenses the government is never going to find them in this mess. This is not always the case, sometimes the government does find out what you’ve done when you are audited and they start sifting through your receipts. Then they rightfully make changes to your personal or corporation tax returns and the next thing you know you owe huge amounts of money in additional taxes and penalties and interest along with it!
The CRA compares businesses to prior years and other businesses in similar industries. They have a very good idea of what the ‘normal’ range of expenses are for your business. If you are well above this range, you can expect an audit to result eventually.
When you are audited, the auditor is going to want to see your documentation to support the expenses you’ve claimed. When they see pizza deliveries, lingerie purchases and children’s toys, they are not likely to allow you to keep these items as deductible expenses. It will also give them reason to look more in depth at your other expenses.
Filing false statements or omissions in both corporations and for individuals will result in penalties that are the greater of $100 or 50% of the amount of the understated tax.
If you have not yet been contacted by Canada Revenue Agency and you would like to correct your misfiled returns, there is a way to correct the returns under the Voluntary Disclosure Program that will waive the penalties associated with the omissions or overstatements. A Chartered Accountant will be able to help you through this process. Speak to one today before Revenue Canada contacts you. www.markfeldstein.net
