The Nine Things That Trigger A Tax Audit By CRA

"Help! I'm being audited," are dreaded words uttered by Canadians. They are especially dreaded by business owners because an audit means extra work and extra accounting costs.

Have you wondered what triggers a tax audit by CRA in the first place?

Once an income tax return has been filed, it is subject to both computer and human review.  Some tax returns will be audited on a random basis, but most audits are caused by what is in the tax return:  the information you supplied and the way you supplied it. 

Here is a list of "red flags" that are likely to trigger an audit by CRA.

1. Claim unreasonable expenses.

The best way to ensure an audit is to be greedy with expenses claimed. The amount of any category of expense has to be reasonable both compared to revenues and compared to other similar businesses. Claiming $10,000 in car expenses against $50,000 in sales will likely trigger an audit. Don't claim such a high percentage unless you supply a mileage