Your Risk of Being Audited
Your odds of being audited by the CRA increase if you report, claim, or deduct:
- Self-employment income
- Rental income
- Commission income
- Professional income
- Farming income
- Fishing income
- Partnership income
- Dividends from private corporations
- Capital gains
- Business investment losses
- Support payments & alimony
- Moving expenses
- Clergy residence deduction
- Childcare expenses
- Adoption expenses
- Interest on student loans
- Medical expenses
- In-kind donations & gifts
- Disability support payments
- Disability tax credits
- Exploration & development expenses
- Investment tax credits
Odds of a small business being audited by the CRA: 1 in 100
Odds of your house catching fire: 1 in 230
Odds of being hit by lightning: 1 in 56,439
Odds of winning the Loto 6/49 Jackpot: 1 in 13,983,816
In 2006/2007, the CRA conducted 366,260 audits of small and medium-sized businesses. Those audited resulted in more than $2.5 billion in additional taxes, interest, and penalties being assessed.
-Canada Revenue Agency’s Annual Report to Parliament 2006/2007
In 2006-2007, the CRA conducted approximately 63,000 GST/HST audits. Those audits resulted in tax assessments totalling more than $600 million.
-Canada Revenue Agency’s Annual Report to Parliament 2006/2007
The CRA decides which taxpayers to audit both randomly and through a targeted selection process. Ten percent of taxpayers randomly selected faced an additional tax bill of more than $5,000. 35 percent of taxpayers specifically targeted for audit faced an additional tax bill of more than $5,000.
-Canada Revenue Agency’s Annual Report to Parliament 2005/2006
One of the major audit priorities of the CRA is the “underground economy”. To the CRA, the underground economy includes:
- Moonlighting – failure to report income from a business activity
- Skimming – failure to report a portion of your business income
- Tips – failure to report tips or any other employment income you receive
- Treating your employment income as business income
- Failure to file your tax return or register.
-Canada Revenue Agency’s Annual Report to Parliament 2006/2007
During 2006-2007, over 1,000 CRA employees worked full-time on identification, audit, or enforcement activities to address the underground economy. They conducted20,635 underground economy audits resulting in assessments totaling more than $284 million of additional tax.
-Canada Revenue Agency’s Annual Report to Parliament 2006/2007
98 per cent of tax evasion charges prosecuted by the CRA in 2006-2007 resulted in convictions. The CRA’s conviction rate has never fallen below 94 per cent in the past five years.
-Canada Revenue Agency’s Annual Report to Parliament 2006/2007
More than 40 percent of taxpayers who appear before the Tax Court of Canada do so without legal representation. The CRA is always represented in the Tax Court of Canada by a lawyer from the Department of Justice.
-André Gallant, The Tax Court's Informal Procedure and Self-Represented Litigants: Problems and Solutions, Canadian Tax Journal, 2005 Volume 53, Issue No. 2, page 333