We’re Getting Audited by the CRA
posted at 2:46 pm
on Apr. 7, 2011
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Recently, Susie got notice that she was going to be audited by the CRA (Canada’s tax agency) for the years 2008 and 2009. They sent a letter asking for a lot of documents.
We arranged to meet them in our accountant’s office. Then we got really stressed. And worried. And then, we met with the CRA representative, Eric, on Tuesday.
We brought them what they asked for, in boxes and on a flash drive—much of the documentation was too big to print out. You really should read, not just scan, this list, to appreciate the amount of work this required to put together:
* Copies of 2008, 2009 tax returns
don’t they already have this? ... This will be the only snarky remark in this post, BTW.
* Background information on the business, details of operations
* Financial statements
* Accountants adjustments, and year-end working papers
* General ledger and General journal
* Cash receipt journal, and list of major clients
* Supporting documents for revenue such as sales invoices, contracts
This is all invoices for the two years
* Disbursements journals and list of major suppliers
* Supporting documents for expenses
this means, all receipts
* All business and personal bank account statments, credit cards, loads, line of credit, deposit slips, cancelled cheques, cheque stubs for her, her spouse and her business.
This is for Susie, for me, and also for Hop Studios
* Monthly statements for all credit cards, loans, lines of credit
* * *
Then, in the meeting, we answered questions for two hours about all of our lives and finances. Afterwards, Eric looked at what we provided and we were asked in print to provide these additional things:
* additional statements for different bank accounts that have a few transactions from Jan 2008 or Dec 2009 i.e. statements that touch the beginning and end of the audit, but that we filed in 2007 or 2010 folders
* subcontract supporting documents (invoices, etc.)
* invoices from 2007 or earlier for bad debt we claimed in 2008
* all bills for BC Hydro, Terasen gas, cleaners, alarm system, etc.
this, in addition to the fact that these already show up as expenses on our credit card or from our bank account direct billed - they want proof that payments we made to BC Hydro were really a BC Hydro expense
* Payroll summaries for 2008, 2009 showing gross wages, deductions (such as CPP, EI, ??? [can’t read] and net pay) for all employees. Also supporting documentation showing calculation of withholding.
* Salary expenses (what are they, supporting documents)
* All individual invoices issued to clients in 2008 - 2009
* List of trips taken in 2008, 2009, duration, purpose, related airfare, taxi, meals and expenses, departure and arrival of each flight, tickets and any supporting documents to justify trips are for business purposes i.e. seminar brochures, advertising
yes, they are asking for the departure and arrival times of every flight we took in 2008 and 2009
* Copy of any insurance policy for any insurance expenses
I do not know what the terms of our insurance policy have to do with our taxes or why they want this
* Supporting documents for collection agency fees paid
* How many cell phones do we have? Need cell phone expense invoices for all expenses claimed
* Invoices for management and consulting expenses claimed in 2008
* All online payment receipts (i.e. for services purchased online)
yes, this means email receipts for all shareware, all stock images purchased, all online transactions
* * *
I don’t know anyone else who’s had an audit from the CRA, so I don’t know if this is a normal level of requests or not. But it’s sure a lot of work, and it feels very invasive and prematurely punative for returns that, as far as we know, are not problematic or odd in any way.
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