Indirect Tax Audit Methods: Toronto Tax Lawyer Guide

Introduction - Indirect Tax Audit Methods

Canada's income tax system is designed around every taxpayer, individual, corporation or trust, filing an annual return which reports all of the income that taxpayer earned during the year. Similarly, GST/HST is administered by requiring suppliers of goods and services to regularly file GST/HST returns which calculate how much GST/HST the suppliers are supposed to remit. In most cases the Canada Revenue Agency accepts the return filed by a taxpayer and assesses them for tax liability accordingly.

To prevent abuse of this self-reporting system for Canadian income tax and GST/HST, the CRA selects some taxpayers for tax audit. During an audit, the Canada Revenue Agency will review the accounting records and supporting documents and compare them to the returns filed by the taxpayer. Taxpayers are required by law to maintain books and records sufficient to allow for verification of their tax filing positions and keep those