A car audit is normally conducted to confirm and uncover valid car expenses claimed when filing your tax return. When claiming car expense, one of the pre-requisites to be eligible to make the claim is to provide the general car information. It does not necessarily mean that the CRA is looking to collect information to penalize you, they usually conduct random spot checks to ensure that the credits are used in accordance with the tax regulations, and they are just looking for more clarification and how you came up with the amount claimed. Following are the steps to take when you do get the dreaded request from the CRA.
Figure out What the IRS Wants
It is good to ensure that you are fully aware of the things the CRA is looking to investigate. What part of your tax return is being audited and for what reason? When you fully understand what they are looking for, it will be easy to address this issue and be well prepared and having all ducks in order. Don’t let yourself be caught off guard because you could end up making a wrong approach and unnecessary mistakes. Make sure that you thoroughly analyze what could be perceived wrong so that you gather all necessary documents accordingly. The CRA normally sends an audit letter to notify you before coming to audit your car expenses.
Gather All Proof You Have
Depending on the claim that is triggering the audit, you need to ensure that you gather all the necessary information to prove it’s validity. It is useful to have any supporting documents and proper records prepared and organized ready to be handed over to the auditor as a proof. In the event that you don’t have any supporting documents, make sure that you will contact the third party who can prepare tangible evidence that will adequately provide the evidence sought by the CRA. Without appropriate evidence, your claim could end up being denied, that would turn out into hefty penalties.
Show Respect and Be Patient, Allow the Auditor to Do His Work
Most of the people expect to wait until they meet the auditor and argue their point and correct their work as they are getting at it. This may not be the most efficient approach. Remaining calm and asking politely when you don’t seem to understand is the key to the auditor’s ability to clarify everything. If you feel the auditor is not approaching the review in accordance with their competence, you can always contact the main office and ask for another professional auditor. Auditors are people who are professionally trained to ensure that they deliver quality professional service to people, therefore, they must adhere to their professional code of conduct.
It is important to communicate anything that could interfere with the results of an audit early in the process to avoid unnecessary stresses or even ending up getting penalized. Auditing is done only on the part of the car that is of interest such as mileage or previous damages and accidents. Once the required aspect of your car is audited, you will be free to use your car, and your claim will be processed based on the evidence acquired from the auditing process. If you are not sure of the CRA query, consider asking a friend who previously filed the same claim, or you can do your own research on the internet and check some of the forums so that you understand what information CRA could be checking on for.