November 26, 2021

Keeping Good Books Doesn’t Have to be Taxing

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November 26, 2021

Good accounting starts with good bookkeeping, as I mentioned last week. Good tax requires both.

Tax is inevitable and for many people it does not spark joy. With regular, ongoing bookkeeping, scanned receipts, and a well-documented business, your tax returns will be filed sooner, and any CRA activity will be more routine and less of an existential nightmare.

Well, it still might. In Dean Blachford’s 2021 Tax Dispute Update, he went over four signals that your CRA interactions might be going off the rails:

1)     The CRA is focusing on an area that could lead to significant tax consequences, such as the shareholder loan account, expenses that they feel are not deductible, or how the income should be treated.
2)     The CRA has given you a questionnaire to complete which will put you on record and be a factor in determining the final assessment.
3)     The CRA want your personal bank statements, which could indicate the start of a net worth audit.
4)     The CRA is talking about assessing gross negligence penalties which could be 50% of the tax on the unreported income tax, and more if it’s HST, plus the interest.

In any of the above cases (and it bears repeating), regular, ongoing bookkeeping, scanned receipts, and a well-documented business will help defend against the CRA’s assertions.

Assessing gross negligence penalties is a pretty high bar, and one of the few that the CRA has to prove rather than assert is true. If your books are regularly updated in Xero, it’s much more difficult to claim you were grossly negligent, or the books and records were unreliable triggering a net worth audit. If your shareholder loan is up-to-date and accurately tracking amounts loaned to, taken from, or paid on account of the corporation, you’ll be able to more easily defend against a costly personal reassessment. Finally, you’ll have peace of mind that the source documents are available to support your expenses, and not in that leopard-print bag somewhere.

So, whether it’s compliance, planning, or disputes, I’ll help you meet your deadlines, plan for and understand the next steps, and evaluate the costs and benefits of each option. And I’ll use plain language.

I can work with the CRA to ensure you’re treated fairly. And if things start to go off the rails, I know some great people at Blachford Tax Law who specialize in resolving tax disputes.

If you want that peace of mind that comes from habit, convenience, and knowing that something is just handled, set up a time to chat with me.


WRITTEN BY

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Brian K. Hlady

Chartered Professional Accountant

CPA Canada In Depth Taxation

Xero Certified Advisor

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