As a small business owner, the Canada Revenue Agency (CRA) is going to be one of the important relationships in your life. So, like any other significant relationship, you’re going to want to keep your relationship with the CRA sweet – and you’re going to have to work at it.
The Work You Have to Do
You have a much better chance of keeping your relationship smooth if you do what the other party wants. And with the CRA, this is a great defensive strategy, too, in case things go wrong and you end up having a tax disagreement or being audited.
1) Keep accurate records and full documentation from the get-go.
Remember; it doesn’t matter if you do them yourself. If accounting is not your forte, hire someone to do it. Nothing makes the CRA crankier than incomplete or missing records.
2) Find out what you have to do.
You’re not going to get any sympathy from the CRA when, for instance, it turns out that you’ve neglected to collect and remit six months of GST/HST because you didn’t realize that (most) businesses that make $30,000 or more have to register for and collect that tax. Ignorance is no defense.
3) File your various tax returns accurately and on time.
Missing deadlines and/or making mistakes on your returns doesn’t just cost you money; it can also “red flag” you for the next round of auditing.
Keeping Your Relationship Sweet
Flowers and candy move the CRA assessors and auditors not a whit. But if the CRA presents you with a reassessment, decides to audit you or the two of you have some other tax disagreement, there are things you can do to help the process along and perhaps help yourself to a better tax outcome.
1) Don’t ignore a letter or call from the CRA.
They won’t go away if you do. Worse, when they do catch up with you, they’re going to be annoyed because you’ve made their job harder. If the CRA contacts you, get back to them immediately.
2) Be polite.
Being rude and/or angry with CRA representatives or auditors is just plain stupid. They are going to decide how much money you have to pay them. So be nice. It will pay off, one way or another.
If the CRA asks you to send a certain document, send it. If you’re being audited, ensure that your records are organized and easily accessible. Making your auditor wait or waste time searching will only make him or her think evil thoughts about you.
4) If you are being audited, don’t meet with the auditor alone (unless you are an accountant or a tax lawyer). Have your tax advisor at the meeting with you; he or she knows a lot more about tax law than you do and will vet the auditor’s questions so you don’t say anything that can be used against you.
5) Answer what you’re asked, but don’t volunteer information.
Once again, not being a tax expert yourself, you might volunteer information that makes your tax situation with the CRA worse. And while you must answer the CRA’s questions, you can get help from a representative before you answer.
It can be enormously stressful when you and the CRA have a disagreement. But some common sense and organization on your part can go a long way towards an amicable resolution.
See other topics in the First Year in Business series