Generally, a taxpayer should try to collaborate with the auditor. Although the taxpayer may feel scrutinized and under attack, there is nothing personal about the audit process. By maintaining a professional relationship with the auditor, the latter may be more receptive to what the taxpayer has to say.
One way for a taxpayer to approach a tax audit is to know upfront what his position is, as opposed to taking a passive approach or going with the flow. A taxpayer who knows the scope of the audit and knows where he stands 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 (yes, this sometimes happens) or that interpretation may not deal with the specific facts of a taxpayer’s case.
The taxpayer should consider the possibility that he might be reassessed and that the matter may go to trial. Therefore, it is important to document what happened during the course of the tax 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 sent to the CRA. Another good practice is to confirm what was discussed orally by putting things in writing.
When talking to the auditor, the taxpayer should be careful in order to avoid contradicting himself, say things that he doesn’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 a taxpayer says 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 the taxpayer can handle, he should consider referring the matter to a tax professional.
Last updated: October 16, 2016