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What Happens If You Get Audited
And Don't Have Receipts?

What-happens-when-you-get-audited-and-don't-have-receipts

If you’ve received a letter from the CRA requesting a tax audit, your first reaction might be complete fear. Verify that the letter you are holding is really from the CRA. Best way to do this is to phone the person who issued the letter using the details provided and ask for their name, phone number & office location. Afterwards, phone the usual CRA business support number (+1 800 959 5525) and verify the details with the person that answers. 

How Do I Know if I am Being Audited by the CRA?

Notifications from the CRA are sent via mail rather than by phone or email. You will receive a notice that will include detailed information about why your return is being reviewed, what documents, if any, they require from you, and what steps to take next.

 

The CRA may accept your return as filed or make adjustments when it has finished its investigation. These modifications could have an impact on how much tax you owe or how much you are refunded.

How does the CRA do an audit?

A CRA auditor will get in touch with you to begin the audit process and to inform you of the audit’s date, time, and location. An on-site audit typically happens in your home, place of business, or representative’s office. The auditor will show you an authentic identification card before beginning the audit.

The purpose of an audit is to confirm that the taxpayer has accurately reported their income, claimed the appropriate deductions and credits, and followed the tax regulations.

Who Gets Audited By the CRA?

The Canada Revenue Agency (CRA) has the authority to investigate and audit anyone who is in charge of paying taxes to the CRA.

Compared to employees, businesses are significantly more likely to be audited, and most audit activity is started by submitting a request to modify a previous return.

Also, unusual activity can trigger an audit e.g. HST is always a payable amount every quarter, but suddenly drops to a large refund in one quarter. 

What Happens if I’m Being CRA Audited and Don’t Have Receipts?

In the case that you do not have the receipts on hand for matching purposes, you will probably need to take some more action. This is a detailed guide on what to expect if you are being audited without receipts.

Step 1: The CRA will contact you

Keep in mind that you will only get mail from the CRA.

To verify the audit, call the CRA phone number  to confirm the audit.

Step 2: Gather information that you already have

Verify the numbers yourself again before giving the CRA your records. Make it easy for the CRA agent to verify your details and find the info they need in the paperwork. Use references to ‘code’ items so that its easy for them to cross-check. 

Step 3: Find other ways to justify the expenses you have mentioned

  • You can still be able to claim a portion of all of your expenses even if you don’t have the receipt by using different methods.
  • This implies that you will still have to gather as much proof as you can to back up the costs you claimed as deductibles on your tax returns.

How to Recreate Your Business Expenses Without Receipts

  • Ask suppliers or service providers for new copies of their invoices and receipts. The second copy may come with a minor cost.
  • Use the bank account statements, credit card statements, and check register at least to indicate the sums you paid.
  • Look through your emails for information on business-related purchases and e-mailed receipts.
  • You can discover proof of your travels and purchases by logging into your several travel accounts.
  • Utilise the phone number on file to demonstrate where your phone has been at the relevant times, use its location history (e.g. Google account or Apple). Setting up the Quickbooks mileage log app on your phone is also useful. 

Step 4: Explain the information to the CRA

If you have been asked to mail documents to the CRA, think about gathering records and sending them off with supporting evidence first. If the CRA agent has asked to meet with you, you will have an opportunity to review your records and provide an explanation of the supporting documentation you do have for each of the areas under investigation.

 

The CRA officer could ask for more documentation from you. Make an effort to obtain this information as soon as you can. Having a spirit of “co-operation” when dealing with the agent goes a long way. If you push back, they tend to push back even harder. 

Step 5: Examine the CRA audit findings

The CRA will add up what they think you can deduct—and, more importantly, what they think you should have paid in taxes—using the data you’ve given them and their calculations for the minimum standard amounts. The audit findings should be available to you in 30 days.

Step 6: Pay the amount owed or file an appeal against the audit findings

You will have options regarding how to respond to the CRA findings once you have received them.

How One Accounting can help you?

If you are unsure about your documentation and explanations, arrange that information in advance and think about engaging with a CPA firm about tax procedures and legislation.

 

An accounting firm can provide valuable assistance in auditing by employing alternative verification methods and reconstructing financial records. Our tax specialists work closely with the businesses to gather any available documentation, such as bank statements, invoices, and electronic transaction records. We also guide small businesses in establishing robust bookkeeping procedures for future transactions to maintain financial records.

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