If CRA has proposed a net worth or indirect verification tax assessment against your restaurant based on estimated alcohol or food sales, here is how we push back: by testing the tax auditor’s methodology itself, not just the final number it produced.
CRA’s Growing Use of Indirect Verification Tax Audits in the Restaurant Industry
A tax dispute currently working its way through an Israeli court has put a spotlight on a CRA-style tax audit method Canadian restaurant owners know well: reconstructing a business’s sales not from its books, but from a tax auditor’s assumptions about what goes into the food.
CRA increasingly relies on this kind of indirect verification of income tax audits when it is not satisfied that a restaurant’s reported sales reflect reality, and for restaurant owners and their bookkeepers, understanding how these projection-based tax audits work, and where they tend to go wrong, is essential to protecting a business from an inflated tax reassessment.
