[Robillard]

Does anyone have a good tax or audit horror story to share?

I'm a bit too young and have too little income to be worth targetting by the CRA for an audit, but I have had my income tax return subject to small adjustments on a couple of occasions because I made some small mistakes when filing my return. I was a bit horrified this year to find that my fund company or brokerage (I'm not sure who messed up) tried to send my T3 to an old address, even though I had updated it. I received my T3 this year weeks after I filed my return.

In my job I do some work on international business tax controversies. Sometimes the CRA can make big mistakes in their reassessments. I've done work for one company in which the CRA made computational errors that resulted in over $7 million in adjustments and over $700K in penalties in the company's reassessment after an audit. While some adjustment was warranted, maybe in the range of $2-3 million, the $7 million was just excessive and the penalty unwarranted. Fortunately, the company should be able to get some double taxation relief by appealing to the competent authorities (sorta like international tax arbitration). Incidentally, the CRA is considered to be a pretty aggressive tax authority when it comes to international corporate taxes.

 

[tojo]

Does anyone have a good tax or audit horror story to share?

I'm a bit too young and have too little income to be worth targetting by the CRA for an audit, but I have had my income tax return subject to small adjustments on a couple of occasions because I made some small mistakes when filing my return. I was a bit horrified this year to find that my fund company or brokerage (I'm not sure who messed up) tried to send my T3 to an old address, even though I had updated it. I received my T3 this year weeks after I filed my return.

In my job I do some work on international business tax controversies. Sometimes the CRA can make big mistakes in their reassessments. I've done work for one company in which the CRA made computational errors that resulted in over $7 million in adjustments and over $700K in penalties in the company's reassessment after an audit. While some adjustment was warranted, maybe in the range of $2-3 million, the $7 million was just excessive and the penalty unwarranted. Fortunately, the company should be able to get some double taxation relief by appealing to the competent authorities (sorta like international tax arbitration). Incidentally, the CRA is considered to be a pretty aggressive tax authority when it comes to international corporate taxes.

I've had a few minor adjustments made when my T3 or T5 slips are late and I don't bother to make the adjustments afterwards. It almost always gets caught. Now I have the slips generated electronically through my discount broker and it won't be a problem in the future....other than that no other issues, but I too would like to hear about some of the auditor tactics and the scope of there investigations and how deep they go in an audit.

 

[hylaride]

I've had a few minor adjustments made when my T3 or T5 slips are late and I don't bother to make the adjustments afterwards. It almost always gets caught. Now I have the slips generated electronically through my discount broker and it won't be a problem in the future....other than that no other issues, but I too would like to hear about some of the auditor tactics and the scope of there investigations and how deep they go in an audit.

How deep they go depends on what they suspect you're doing that's wrong. Their computers are very good at raising red flags. If you live and work on a farm, but still claim the transit credit...well you guess what's going to happen. If you have many other irregularities they're only going to dig deeper.

I was audited 4 years in a row during my college years. My (single) mother maximized some of the tuition tax credits by declaring me a spousal equivalent and earned rather large returns (she had a high income). This kept setting off a red flag, as I guess it's a common fraud tactic for high earners. :-/

The CRA is actually quite reasonable (taking our money away from us aside . My mom and I just mailed in the forms and that was it. On the 4th audit, we told them that it's unreasonable how we kept getting flagged and the woman on the phone agreed and cancelled the audit and we never got another one. All they want is proof, so if you're going to claim make sure you can back it up.