WHAT IN THE WORLD IS AUDIT INSURANCE? AND WHY IS MY ACCOUNTANT OFFERING SUCH A THING?
Sharon Perry prides herself on being in the know for the latest and greatest in all things accounting, tax and small business. When it comes to professional development, two main areas that Sharon especially focuses on is CRA and learning from her colleagues. Every opportunity that comes her way in regards to CRA, Sharon does her best to attend. These include liaison meetings as well as special round table invites between CPA BC and CRA. Why is it so important? These meetings are where Sharon learns what CRA is up to. Who are they auditing? Are they targeting specific types of income, expenses, deductions or credits? What new methods have they implemented or are going to implement? Having these answers and more, enhance Sharon’s ability to provide the best service for her clients.
Similarly, learning from her colleagues is also extremely important. Sharon sits on a Steering Committee for the Small Practitioners Forum with CPABC. The Forum meets 3 times a year to discuss each others successes and challenges from HR to IT to Tax. We learn from each other but more so, connections are made through this group to keep our conversations going throughout the year so when we face an issue, we have colleagues, or rather friends, who we can reach out to and ask.
Through this Forum, Sharon learned about Audit Insurance and with 20+ years of experience, Sharon is finding that CRA is auditing WAY more these days, especially in light of all the COVID benefits, rebates, etc.
Most taxpayers aren’t trying to scam the system or claim what they are not eligible for. Most taxpayers are just trying to do what they are obligated to do which is file their taxes. You pay an Accountant to do this and then CRA sends you a Notice of Assessment so it must be done. They must have accepted it as is. And then 3 months (up to 3 years generally) goes by and you receive a letter. CRA wants more information. You already paid your Accountant to prepare and file your taxes. But what wasn’t included in the cost is dealing with these letters.
These letters could range from a simple request of your tuition slip, child care receipts, donations, etc. Or maybe a more complicated request where you have a small business and they want all invoices and receipts for your expenses. Or you use your vehicle for work purposes and they want to audit the vehicle expenses.
Responding to these letters are often more time-consuming than the preparation of your taxes, especially when they can come a few years after the fact. Getting another bill from your Accountant isn’t necessarily an ideal scenario either. But it is CRA's job to obtain proof and random sampling and it is your responsibility as a taxpayer to provide the support when they request it. And this is where Audit Insurance comes in.
Audit Insurance is an annual fee that will cover your Accounting fees related to audits with CRA and PST through the Ministry of Finance. You must have an existing policy at the time you receive an audit letter.
Responding to a CRA audit generally costs a minimum of $1,000. Some audits have cost upwards of $10,000. What do we know? CRA is auditing way more. And it is getting costly.
The cost of Audit Insurance ranges depending on your tax situation; from as little as $200 (plus GST) to about $1,150 (plus GST). Paying a small annual fee, based on your company revenue or type of personal tax return, could help avoid a much larger invoice for our professional fees.
This product is absolutely your choice and your choice alone. There is no obligation as a client to accept this insurance.
If you are a client and want more information, please contact us.
***This blog is for information only and not to be used as tax advice or planning without first seeking professional advice. Information is subject to change without notice.