MONTREAL- Nick Moraitis, an accountant from Fuller Landau, offered the following tips to On Your Side on how to decrease the chance of getting audited.
Governments once only targeted about two percent of Canadians for tax audits but that number is believed to be on the rise.
According to Canadian law, those who misreport on their taxes can be held accountable for up to six years.
Here are some red flags that sometimes attract a tax audit.
1-The income numbers you report do not correspond with those of your employer's.
"If there's a discrepancy, they're going to turn around and ask, 'how come you told this and they're telling us that?'" asks Moraitis.
2- Major changes in the income you report from year-to-year.
3-Under-reporting income by hiding cash payments.
4-Having an income that doesn't seem sustainable, for example by living with little money in an expensive lifestyle.
"How is it you can afford Westmount and a car on $10,000?" Moraitis asks, citing a possible example.
5-Exaggerate your home office business deductions.
"If you're claiming 50 percent of your home and home office and you're really there to do paperwork and out there meeting or servicing clients, you're asking for an invitation," said Moratis.
6-Filing dodgy business expenses, such as meals and travel. It's best to keep a record of meetings in case these are queried.
7-Charitable donations are sometimes scrutinized, as are some donors who appear very generous beyond their means.
8-Math errors will surely attract attention.
9-Late-filed returns can also create a target for auditors.
