Award Winning Tax Lawyers in Toronto – Just 4 Lawyers
Under the Income Tax Act, The Canada Revenue Agency (CRA) has the power to raise an assessment regardless of whether a tax return has been provided. The CRA can review a taxpayer’s lifestyle or assets and compare it with his reported income. During this process, the CRA evaluates the appreciation of a taxpayer’s wealth by comparing the assets and liabilities. Any discrepancy between a taxpayer’s wealth increase and his reported income will be deemed as unreported income.
The CRA will usually conduct a net worth audit if a taxpayer’s records are unreliable or there is evidence that indicates the taxpayer’s lifestyle doesn’t match his income on the tax return. In particular, the CRA focuses on cash-based businesses such as restaurants, hair salons or convenience stores because it’s harder for the CRA to track all of the transactions.
The CRA will usually conduct a net worth audit if a taxpayer’s records are unreliable or there is evidence that indicates the taxpayer’s lifestyle doesn’t match his income on the tax return. In particular, the CRA focuses on cash-based businesses such as restaurants, hair salons or convenience stores because it’s harder for the CRA to track all of the transactions.
