7 tax mistakes that could trigger an audit

Someone out there is watching you.  And that someone, occupying a cubicle deep in the bowels of the Canada Revenue Agency, is just itching for an excuse to get out of the office and conduct an audit -- of you.

Here are seven mistakes that HR Block says are most likely to put you under the CRA microscope.

1. Forgotten T slip: You are the boss of your income and CRA wants to know every nickel you’ve earned -- even if you  don’t have a T slip.  CRA has one of those lightning fast matching programs that will zero in on you if an employer  has filed one and you don’t report it.  And if you fail to report income from a T-slip twice in two years the penalties could be substantial.

2. Hobby or business:  Growing shiitake mushrooms in your basement rec room may be a whale of fun but creating  income reducing losses from it could get you into trouble.   If there is no reasonable expectation of a profit and  years of losses, expect an auditor to come knocking at your door.

3. Incorrect support credit claims:  Filling out line 220 is likely to give you a free pass to a CRA review because  support payments for children are deductible only if your agreement was dated before May 1, 1997.  And if you are supporting a spouse or common-law partner the agreement or court order must be filed with the CRA.  

4. Claiming regularly reviewed credits:  In a six-year period I had four CRA reviews -- two after claiming moving  credits and two following tuition transfers from my two daughters.  These claims are top of the CRA’s  let’s-take-second-look list.   Just make sure you keep your moving receipts and the signed T2202A form to back up the tuition transfer.

5. Out of the ordinary: If you claim 50 per cent of your home expenses and 95 per cent of your car expenses for

business use, chances are you will trigger an audit.  Be reasonable, truthful and, when it comes to auto expenses,

keep a log book.  

6. High life on low income:  Few taxpayers have ever heard  of a net worth assessment but the CRA can conduct one if  they suspect your claimed itty bitty income is covering up under-the-table work.  The CRA actually has a snitch line  and if you have annoyed someone who knows your income doesn’t match your lifestyle you may find yourself with a lot  of explaining to do.  

7. The cheatin’ habit: If you’ve been a little less than honest in the past, and been caught, the CRA is more likely to circle back for a repeat review.  

As always, honesty is the best policy on the tax front -- oh yes, and keep those receipts for six years, just in case.

 Contact me at Alison Griffiths