Vancouver, BC -- (ReleaseWire) -- 06/15/2021 --Many mature businesses have endured a CRA tax audit at least once in their life. For most businesses, it isn't an issue. As Vancouver tax planners, it pays to have adequate financial records a CRA auditor can examine—the trick is knowing what qualifies as adequate records. For more, go to: https://www.mewco.ca/blog/why-a-real-general-ledger-is-the-first-line-of-defence-during-a-cra-tax-audit/
The CRA audit has changed from twenty years ago. In the past, an actual person came to the business premise to examine the books and records. If the business has a spare room or desk for the auditor, the audit was carried out on-premises. The business owner simply had to make available financial records for the auditor and avail themselves to answer questions.
Today, the auditor can be in the Winnepeg tax office while auditing a Vancouver business. This is because CRA has shifted the logistical burdens of audits solely onto the taxpayers. The taxpayer will receive a letter from the CRA informing the taxpayer of the period and the matter being audited. It is up to the taxpayer to provide all the financial information necessary to the CRA through electronic or paper format.
This lack of face-to-face meetings between the auditor and the taxpayer creates opportunities for miscommunication. CRA could conceivably not receive the information it is seeking despite availability because the taxpayer and the auditor are not in the same room to go over the information.
Why General Ledgers Are Important for Small Businesses
Most small businesses, particularly successful ones, keep a general ledger. A general ledger is a well-sorted set of financial data that is very user-friendly for accountants. It is like a logically organized garage where similar items are in the same place and can be readily counted or audited in our case.
When a real general ledger report exists, it allows the users, (taxpayer and the CRA) to examine records efficiently through sampling and various other selection criteria. It allows users to sort financial records so that they can quickly determine the tax status of various types of receipts and expenses. After all, the auditor is an employee with a workload just like any other employee. If the taxpayer cannot provide information promptly during the audit, the auditor has no choice but to reassess the taxpayer unfavorably.
Running a business is no excuse for bad paperwork. Auditors are busy and do not have time to sort through documents and receipts. If an auditor can't find the information they need—or if a business is not properly represented, the result can be a worst-case scenario.
Keeping a general ledger is a cost-effective solution that helps businesses stay out of trouble with the CRA. To learn more about setting up a general ledger, call 604-688-9198 to talk with the Vancouver tax planning specialists at Mew + Company.
About Mew + Company
Mew + Company, Vancouver, is an ideal solution to the taxation problem. With a simple philosophy of building long-lasting customer relationships, the company has been serving corporate clients in a variety of fields—including restaurants, real estate, retail, and the service industry. Investing in their specialist services will undoubtedly be fruitful for all kinds of clients.
To learn more about Mew + Company and discuss their services, log on to https://mewco.ca/
Lilly Woo, CPA, CA, CFE, CFP
Mew + Company Chartered Professional Accountants
604 688 9198
Company Website: https://www.mewco.ca