Generally, you should try to collaborate with the auditor. Although you may feel scrutinized and under attack, there generally is nothing personal about the audit process. By maintaining a professional relationship with the auditor, the latter may be more receptive to what you have to say.
One way for you to approach a tax audit is to know upfront what your position is, as opposed to taking a passive approach or going with the flow. If you know where you stand, you will be more critical when dealing with the auditor. Critical is meant in the sense of being alert. It is important not to take what the auditor says for granted. Auditors make mistakes too. Further, they generally proceed based on the Canada Revenue Agency’s interpretation of the law. The CRA’s interpretation of the law may not be correct.
You should always consider the possibility that you may be reassessed and that you may have to go to trial to defend your case. Therefore, it is important to document what happened during the course of the audit and put things in writing to avoid any possible misunderstandings. For example, it is a good practice to keep a copy of the documents you send to the CRA. Another good practice is to confirm what was discussed orally by putting things in writing.
When talking to the auditor, you should be careful in order to avoid contradicting yourself, say things that you don’t mean or disclose information that is not connected with the audit. CRA officers, including auditors, are required to keep a record of their conversations with taxpayers, so whatever you say may be noted. Once noted, that information will become available to other officers looking at the file, including the counsel (from the Department of Justice) handling the file at the litigation stage, if the matter ever goes this far.
If the complexity of the audit is beyond what you can handle, you should consult a tax lawyer.
Last updated: October 16, 2018