How we help
- Source-and-application analysis
- Opening and closing net-worth reconstruction
- Personal expenditure assumption challenges
- Pre-assessment proposal-letter response
CANADA'S TAX & BUSINESS LAWYERS
Avoid Discrepancies from CRA Audits and Be Deemed as Unreported Income
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What is a Net Worth Audit?
Under the Income Tax Act, The Canada Revenue Agency (CRA) has the power to raise an assessment regardless of whether a tax return has been provided. The CRA can review a taxpayer’s lifestyle or assets and compare it with his reported income. During this process, the CRA evaluates the appreciation of a taxpayer’s wealth by comparing the assets and liabilities. Any discrepancy between a taxpayer’s wealth increase and his reported income will be deemed as unreported income.
When should you expect a net worth audit?
The CRA will usually conduct a net worth audit if a taxpayer’s records are unreliable or there is evidence that indicates the taxpayer’s lifestyle doesn’t match his income on the tax return. In particular, the CRA focuses on cash-based businesses such as restaurants, hair salons or convenience stores because it’s harder for the CRA to track all of the transactions.
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When should you expect a net worth audit?
The CRA will usually conduct a net worth audit if a taxpayer’s records are unreliable or there is evidence that indicates the taxpayer’s lifestyle doesn’t match his income on the tax return. In particular, the CRA focuses on cash-based businesses such as restaurants, hair salons or convenience stores because it’s harder for the CRA to track all of the transactions.
Book a Consultation with a Lawyer
How to challenge a net worth audit?
3 Ways to Schedule a Consultation
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At Barrett tax law, we’ve helped numerous business owners and individuals fight the CRA’s net worth audits, feel free to book a consultation with our experienced tax lawyers if you need help.
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What to expect when you call us
Your first call is a free, no-obligation consultation with a tax lawyer. We will review the details of your situation, explain your options under the Income Tax Act and CRA administrative practice, and give you a clear, fixed-fee quote if you choose to retain us. Your consultation is confidential, and once we are retained, communications are protected by solicitor–client privilege.
If you retain us, we begin work within 24 hours of being retained.
Frequently asked questions
Who is at risk of a CRA audit?
Self-employed individuals, cash-business owners, real-estate flippers, large charitable donors, taxpayers with offshore assets, and high-income earners with year-over-year income changes are statistically more likely to be audited.
Can the audit be conducted somewhere other than my home or office?
Yes. We routinely host audits at our office. This keeps the auditor away from staff and family, and lets us control the flow of information and documents.
I received a Proposal Letter — what now?
A Proposal Letter is the auditor's draft assessment. You usually have 30 days to respond. This is the most important window in the audit — once it becomes a Notice of Reassessment, your only remedy is a Notice of Objection.