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Tax Audit – Can I Deal with it Myself?

It’s a Thursday afternoon at the office and you have just received a letter, from a tax authority, informing you of an upcoming audit of your business.

You do not think much of it since you perceive yourself as a good taxpayer. You trust your accountants, who have always seemed like a reliable and qualified team. You have always tried to comply with the tax laws and have never done anything to consciously avoid your tax obligations. Thus, you feel confident about handling the visit of the auditor yourself.

As much as you and your accounting team have been acting diligently and in good faith, you must understand that tax laws are complex. A printed version of the annotated federal Income Tax Act and associated documents that many practitioners use contains over 3000 pages. Similar versions of the Excise Tax Act (GST), Taxation Act (Quebec) and of the Act Respecting the Québec Sales Tax (QST) together amount to over 5000 pages. The interpretation, application and administration of these laws are not an easy task and they sometimes have more to do with art than science. Whether your business is a multinational corporation that employs an army of tax professionals or a small business that employs one accountant, it is likely that the tax authorities will disagree with you at some point during the audit. This often stems from a lack of explanation, misformulated answers or insignificant technicalities noticed during the audit.

In our experience, these mistakes may develop into unimaginable and costly issues for certain taxpayers. Professional assistance at the early stages of an audit may prove to be extremely valuable in order to avoid some of these mistakes and ensure your rights as a taxpayer. If you receive an audit letter from a tax authority, our advice is to treat it with great care and consult a tax professional, if only to prepare yourself adequately for the audit of your business.