Cash Business, Self-employment Can Be Audit Triggers

Posted: December 26, 2015

Any number of factors can lead to a taxpayer being audited by the Canada Revenue Agency (CRA), but some “red flags” may make certain people more likely candidates, says Toronto tax litigation lawyer David J. Rotfleisch.

“It can be based on a business or industry that is being targeted, for example, building trades or restaurants which could deal in cash, or it could be a high level of deductions or losses,” says Rotfleisch, founding tax lawyer at Rotfleisch & Samulovitch Professional Corporation.

As the CBC reports, other ways taxpayers are attracting the CRA’s attention include, not reporting income from a T-slip, or ignoring the CRA’s requests for information.

Another “attention-getting trigger” for the CRA, says the CBC, is being self-employed, namely in those professions where cash often changes hands.

Rotfleisch agrees that self-employed taxpayers are at an increased risk of being audited.

“Even if they are honest, they are more prone to make mistakes. They also have the opportunity, in some cases, to have unreported cash sales.”

As such, taxpayers who have realized they have made an error in their tax return should be sure to correct it with the CRA as soon as it is identified, says Rotfleisch. If necessary, he says, "do a voluntary disclosure to avoid penalties, prosecution and reduce interest.”

Ultimately, he says, as soon as a taxpayer realizes they have a material error or are being audited, they should contact a tax lawyer.



"These articles provide information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."

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