Vancouver enjoyed excellent weather during the 2019 summer months without smoke to block the sunrays.
CRA Audits Vancouver Businesses
While the taxpayers were busy vacationing, the CRA was very busy sending out tax review letters to many businesses.
Based on my own experience and conversations with colleagues, a massive fishing expedition was underway this spring and summer. Many businesses are being reviewed for auto expenses, payroll remittances, GST ITC claimed, and subcontractors who should be on payroll.
At the personal tax level, very senior taxpayers with confirmed disabilities are continued to be asked to provide receipts for medication and attendant care.
Based on initial reassessments letters prepared by the CRA thus far, the tax collection agency is taking a hardline approach and is leaving it for the taxpayers to fight back at their own expenses.
CRA Audits Businesses in Vancouver – What I am Witnessing
Here is a list of what I am witnessing.
Anyone who owns a business knows how difficult it is to keep a detailed driving log. It is human nature to attend to the urgent matters first and let’s face it, logging your driving is not an urgent matter. The Income Tax Act is black and white on auto expenses – date, place, and purpose of the drive must be recorded in a centralized log. Otherwise, the auto expenses will be denied. Basically, auditing automobile expense deducted is a relatively easy way to collect more taxes.
For the first time in my many years of practice, I am seeing a corporation assessed a minor penalty of less than $ 200 for under withholding income taxes from an owner/manager payroll. In other words, the amount of income taxes under withheld was less than $ 2000 as well. Hence, in this case, if the business has to make up for the $ 2000 income taxes shortfall, the shareholder will get to claim this amount as credit on his personal tax return. Basically, it is a wash. Only the $ 200 penalty payable towards CRA is real expense to the corporation. I can’t help but wonder if the corporation will get another payroll review next year given a delinquency was uncovered this year. Also, CRA can’t say the $200 penalty collected was a great return on investment.
And finally, the always talked about contractor vs employee and the tax treatment. Although this matter has been audited by the CRA frequently, I am only witnessing the first reassessment on this matter now. Again, the taxpayer is in the IT industry where subcontractors are frequently used for short term projects. Out of a handful of subcontractors used by the CCPC, CRA decision was one subcontractor did not meet the self-employment test and hence should have been on payroll. Again, the renumeration under review was less than $ 20,000 for the six month period. Hence, the business will be assessed with CPP and EI premiums. Again, the assessed amount is not large enough for the taxpayer to incur professional fees to appeal.
My case and point is that the CRA is coming hard for the low hanging fruits.
Vancouver Business Accountant – Mew & Company
For more information on business consulting help or CRA audits your business – give Mew & Company, Vancouver professional chartered accountants a call at 604-688-9198.