I made a YouTube video on this very topic, and I highly recommend you watch the video. Before we begin, I have a confession to make. It was my second video, I was still learning, the graphics and effects are horrendous. Looking back, it’s quite embarrassing. On the flip side I am super happy to say the content itself is top shelf. Save yourself the eye strain and listen to the video like a podcast.
The link to the video is at the bottom of the blog.
Canada’s debt is sky rocketing. At the time of writing this piece the only solution is to take a sledgehammer to our current system and policies. Despite our decline and failures during 10 years of Liberal government’s reign one thing has managed to maintain some level of respectability and that is the Canada Revenue Agency (CRA). I admit the CRA is not as advanced as European nations or India’s tax bureau but it is respectable and eventually they seem to catch the baddies!
Now that you have the preamble let’s come back to the Federal Debt… Under Trudeau’s watch the debt has gone from worrisome to in need of life support. So, how do you help reduce the debt. We’re already taxed to up to our eyeballs therefore increasing our taxes is a non-starter. The next best thing is to put pressure on the CRA to go on a witch hunt to ensure Canadians continue to pay every penny of our exorbitant tax rate. If Canadians are late with their tax bill charge penalties and don’t forget those lovely interest charges. Any sign that someone is even thinking of stepping out of line, even if it’s unknowingly pounce on them and show them who’s the boss!
CRA audits and CRA enquiries are on the rise. Pressure from the feds is the primary reason but a gluttony of shoddy accountants, and large number of immigrants not aware of the rules provides a lot of low hanging fruits.
Guys, the CRA has the power to enquire as far back as they want. Just because you’ve received your notice of assessment does not mean you are out of the danger zone. A new client received a letter from the CRA questioning his 2022 tax return, I am writing this piece in 2025. The question is what can you do to protect yourself? Before I share the secret sauce remember this very important fact, you cannot avoid or circumvent an audit. Through proper record keeping, transparent conversation with your accountant, you can satisfy the CRA proving you are a good Samaritan and that they should go look under someone else’s rock.
Here are your 3 golden rules:
Keep a digital copy of your invoices. Keep the digital invoices for at least 7 years. Full transparency: data is cheap I plan on keeping my digital receipts for ever. Why delete it? Some clients are with certain telecommunication companies or certain utility companies. They feel their invoice is safely stored on their providers website. Why bother going through the trouble and hassle of downloading it. This lazy mindset can come back and haunt you. If you change vendor your old invoices are gone forever. By the time you realize this blunder it will be too late. If you have dealt with Canada’s two large telecommunication companies for any matter, then you will need all the good luck in the world trying to retrieve your invoices. Therefore, rule number one and the most important rule; keep a digital copy of all your invoices.
If you are a small business get some basic bookkeeping services. Your Excel spreadsheet is most likely full of errors. Your bank statements and your credit card statement are not admissible for a CRA audit. The CRA will gladly take all your statements, and they will go through it with a fine-tooth comb. At the end of the day, it will be used as tool to trip you as opposed to help you. Bookkeeping is not overly expensive. When you start your business think of bookkeeping as a necessary expense as opposed to an optional expense. Spending a few bucks a month can save you thousands of dollars.
Last but not least golden rule number three is always file your corporate, individual, and sales tax rule on time. I assure you, being fashionably late will not make you look cool and does not give you any “street cred”. Find a reliable accountant who you feel has your back and give them the Green light to invoice you and file your taxes on time. It is your fiduciary duty to pay your accountants invoice on time. Trust me, a good accountant will go above and beyond if you pay them on time. In addition to filing your taxes on time make your tax submissions by the deadline. This includes payroll submission, and sales tax submissions. Work with your accountant to help you manage your cash flow. Not only with this keep the CRA happy but it will also keep you vendors happy. Clients who are supported by their vendors have an advantage over their competition.
At the end of the day, it’s all about common sense and not cutting corners. Your mom was right… an ounce of prevention can save you from a pound of medication.