Audit
5 years ago, I was audited by CRA, the tax people. It was my fault. I checked the wrong box on the tax return. The tax people complained about it and offered me the opportunity to uncheck the box. I, very smartly, refused to uncheck the box and kept on checking the box. So I got audited.
I went to the accountant and had 4 weeks to prepare for the audit. I was ready when it was time for the audit. I prepared for the audit and checked everything in these 4 weeks. I spent at least 300 hours plus the accountant time. The audit lasted 45 minutes!
Please note that I work from home and I have a separate room as my office. Before the audit started the auditor asked a few questions:
- Does the business pay you rent?
- Do you have any entertainment expenses?
- Is any family member an employee of the business?
- Have you done any leasehold improvemen?
- Are you claiming any depreciation for...
The auditor asked a few more of these questions which I don't remember exactly, but the answer was always the same: NO.
- All accountants and financial advisors will tell you to take all the legal deductions possible.
- I don't claim these expenses because it simplifies my bookkeeping and my life.
- Before you make these kind of decisions, consult an accountant who will tell you why I'm wrong.
By the way, the result of the audit was:
- The CRA screwed up and they owed my $17.
- I screwed up and owed them $38.
I wrote a cheque on the spot for the $21 and a few cents. 300 hours and $500 in accounting fees for $21?