Preparing for an Income Tax Audit: What You Need to Know

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Income Tax Audit

The process of filing and managing your taxes is no small feat. It can be a long and arduous process that involves collecting all of your tax-related documents and claims in one place so that your tax lawyer can take the reins and proceed with the rest of the process.

However, in some cases, the process of filing your income taxes isn’t as smooth as you anticipated. Perhaps you’ve been assigned an audit from your country’s tax revenue agency. What do you do now? The first step is to prepare yourself as best as possible for a said upcoming audit so that you can work closely with your GST/HST lawyer to rectify the situation in a timely manner.

In this guide, we’ll take you through some simple steps that can help you better prepare for your income tax audit. Together with your tax lawyer, you can feel confident going into this process, knowing you’ll come out with the best possible outcome.

Know Your Dates

While you can’t predict the exact month or date you’ll receive your notice for a tax audit, you can ensure you have a complete understanding of the dates required for you to file certain paperwork or get in touch with your assigned auditor. Missing due dates may result in an arbitrary assessment, which could cause you to pay more in taxes than necessary. If you’re working with a professional income tax attorney, they will be able to help you keep track of all your upcoming dates so you can avoid this penalty.

Make a List

Tax auditors can go back as far as four years, looking at multiple years of taxation during the audit process. Before your audit commences, the tax lawyers at TaxLawCanada.com recommend making a list of the taxation years included in your audit, whether you have business taxes to include, and any particular records the tax auditor is asking to see.

Once you’ve compiled this list, you can hand the required documents to your tax lawyer, and they will proceed with the process, speaking with the auditor on your behalf.

Get Everything in Writing

Your tax lawyer, if you’ve hired one, will help you with this step — but it’s imperative to have your auditor put all of their questions and requirements in writing. This step ensures the auditor is unable to stray from appropriate questions and does not ask anything out of bounds. It also acts as a reference point in case there are any discrepancies within the audit process.

Know Your Potential Outcomes

While each income tax audit is unique, there are often common outcomes one can expect when the process is complete.

The best-case scenario is that the auditor finds you without fault, closes your case, and you’re free to continue on with your fiscal year. In other cases, the auditor may propose changes which you may or may not agree on — your tax lawyer will help you with this step. The worst-case scenario is that evidence is found of evasion or fraud. In this case, your tax lawyer will step in and take over — this is highly unlikely, as most tax audits are resolved in a cordial, timely manner.

Preparing for an Income Tax Audit: What You Need to Know

The process of filing and managing your taxes is no small feat. It can be a long and arduous process that involves collecting all of your tax-related documents and claims in one place so that your tax lawyer can take the reins and proceed with the rest of the process.

However, in some cases, the process of filing your income taxes isn’t as smooth as you anticipated. Perhaps you’ve been assigned an audit from your country’s tax revenue agency. What do you do now? The first step is to prepare yourself as best as possible for a said upcoming audit so that you can work closely with your GST/HST lawyer to rectify the situation in a timely manner.

In this guide, we’ll take you through some simple steps that can help you better prepare for your income tax audit. Together with your tax lawyer, you can feel confident going into this process, knowing you’ll come out with the best possible outcome.

Know Your Dates

While you can’t predict the exact month or date you’ll receive your notice for a tax audit, you can ensure you have a complete understanding of the dates required for you to file certain paperwork or get in touch with your assigned auditor. Missing due dates may result in an arbitrary assessment, which could cause you to pay more in taxes than necessary. If you’re working with a professional income tax attorney, they will be able to help you keep track of all your upcoming dates so you can avoid this penalty.

Make a List

Tax auditors can go back as far as four years, looking at multiple years of taxation during the audit process. Before your audit commences, the tax lawyers at TaxLawCanada.com recommend making a list of the taxation years included in your audit, whether you have business taxes to include, and any particular records the tax auditor is asking to see.

Once you’ve compiled this list, you can hand the required documents to your tax lawyer, and they will proceed with the process, speaking with the auditor on your behalf.

Get Everything in Writing

Your tax lawyer, if you’ve hired one, will help you with this step — but it’s imperative to have your auditor put all of their questions and requirements in writing. This step ensures the auditor is unable to stray from appropriate questions and does not ask anything out of bounds. It also acts as a reference point in case there are any discrepancies within the audit process.

Know Your Potential Outcomes

While each income tax audit is unique, there are often common outcomes one can expect when the process is complete.

The best-case scenario is that the auditor finds you without fault, closes your case, and you’re free to continue on with your fiscal year. In other cases, the auditor may propose changes which you may or may not agree on — your tax lawyer will help you with this step. The worst-case scenario is that evidence is found of evasion or fraud. In this case, your tax lawyer will step in and take over — this is highly unlikely, as most tax audits are resolved in a cordial, timely manner.