What Triggers a CRA Audit? Understanding What Catches Their Attention and How to Navigate the Process

Taboos and fears surrounding taxes aren't something new in Canada. And, the mention of the Canada Revenue Agency (CRA) audit can send shivers down many taxpayers' spines. However, if you understand what triggers a CRA audit, such phobias can be alleviated. This article sheds light on this subject and provides insight into various ways you can address audit concerns through the CRA website, mobile app, or call center.

Understanding What Triggers a CRA Audit

There isn't a straightforward answer to what triggers a CRA audit because the CRA uses a risk-based approach. The agency utilizes advanced analytics to identify cases with a high risk of non-compliance. The agency looks into factors such as inconsistencies between previous and current returns, businesses' income comparisons to others in the same industry, frequent property trading, and large deductions. Here are some specifics.

• Inconsistencies in Returns: If the CRA detects inconsistencies or significant variances between your previous and current tax returns, it could trigger an audit.
• Income Comparison: If your income is significantly less than others in your industry or neighbors, the CRA may decide to review your situation.
• Property Trading: Frequent property trading within a short period can attract the CRA's attention, as it may indicate unreported income.
• Large Deductions: Claiming large deductions that seem out of proportion to your income can also trigger a CRA audit.

Navigating a CRA Audit Through the CRA Website

If you receive a CRA audit notice, the first place you may want to turn to for help is the CRA website. You can do a lot here. Firstly, verify the legitimacy of your audit letter in the 'Protect Yourself against Fraud' section. If it's verified, navigate to the 'Reviews and Audits' section where you can learn more about why you were selected, what CRA will review, and what you need to do next. More importantly, the site provides detailed guides on how to respond to Auditor's queries and make payments if necessary.

Using the CRA Mobile App for Your Audit

Another handy resource for handling a CRA audit is the MyCRA mobile application. This app allows you to interact with the agency right from your mobile device. It includes features where you can check your account balance, view tax return status, change your address, check CRA mail, and even request a proof of income statement (option c). Additionally, it offers beneficial tools such as a Benefit and Credit payment calculator and a Direct Deposit Enrollment function. The design is user-friendly, making the auditing process much more straightforward.

Navigating a CRA Audit Through the CRA Call Centre

If you prefer a more human touch during your audit experience, the CRA call centre is a great tool. You'll be able to speak directly to a CRA agent who can guide you through every step of the auditing process, from understanding why you're being audited to what documents you need to gather and how you can pay any applicable fees or amounts due. However, due to high call volumes, it's important to be patient and try calling during less busy times.

By understanding the triggers and pathways of a CRA audit, and knowing how to efficiently navigate the available tools, you can turn what seems like an intimidating process into a manageable one. As always, accurate recording and reporting of your financial affairs will greatly reduce the risk of triggering a CRA audit and lead to a smoother experience with CRA interactions.