Representation for Tax Audit & Reassessment
WHAT IS A TAX AUDIT?
A tax audit occurs when the CRA, IRS or provincial/state taxing agency reviews your tax filings including your income tax returns, HST returns, sales tax returns, payroll tax filings, and benefit filings to determine if income, expenses, amounts claimed and credits are reported accurately according to the tax laws in your jurisdiction.
WHAT ARE THE REASONS FOR A TAX AUDIT?
Here are some of the most common reasons for a tax audit:
- Filing inaccurate returns
- Unreported income
- Underreporting
- Calls reporting the taxpayer to CRA or IRS from former and current employees, spouses, business associates or other individuals
- Tax deductions that exceed the averages for an individual's income:
- Comparison to third party information
- Missing information found under the matching program
- Certain types of deductions or credits claimed
- An individual's tax audit history – there is a history of a previous tax audit which resulted in an adjustment
- Random election based on computer generated lists of audit projects testing a particular group of tax payers identified as having high non-compliance
- Association with other taxpayers who were selected for a tax audit
- Offshore credit cards
- Not reporting taxable alimony payments received
- Changes in wealth
- Filing returns with very high Discriminate Information Function (DIF) scores
- Earning more than $100K
- Consistent business losses
- Information received from other sources on potential non-compliance with the tax laws or inaccurate filing
- Random selections
WHAT IS A TAX REASSESSMENT?
After a tax audit the CRA will send you a Notice of Reassessment indicating the additional taxes plus interest and penalties that you have to pay, if applicable.When you receive a Notice of Reassessment, you have generally have 90 days (from the mailing date) to file a Notice of Objection with the Appeals Division of the CRA. If you are not successful, you can appeal to the Tax Court of Canada. In the U.S. you may file a Petition for Reassessment of any tax to the IRS and US Tax Court. Different taxes, assessments and reassessments have different filing dates which should not be missed as you may prejudice your rights.
WHAT SHOULD YOU DO IF YOU HAVE DISCOVERED THAT YOU ARE GOING TO BE THE SUBJECT OF A TAX AUDIT, HAVE RECEIVED A NOTICE OF REASSESSMENT, OR WANT TO PETITION FOR REASSESSMENT?
Call your tax lawyer first. Tax law is extremely complicated and you need top notch legal representation in order to possibly avoid fines and/or other unpleasant consequences. Furthermore an auditor's function is to ensure compliance with the government's view of the law and not protect your rights as a taxpayer. The C2 Global Law tax lawyers provide legal representation for individuals and businesses in Canada and the U.S. seeking help with tax audits and reassessments. Contact us today to make an appointment for a consultation.