Vancouver businesses are being reviewed for auto expenses, payroll remittances, GST ITC claims, and subcontractors
Vancouver, BC -- (ReleaseWire) -- 10/18/2019 -- As a firm of chartered professional accountants in Vancouver, the team at Mew and Company warn that while taxpayers were on vacation, the CRA was busy sending out tax reviews to many businesses. In most cases, businesses are being investigated for auto expenses, payroll remittances, GST ITC claims, and subcontractors who should be on payroll. For more, go to: https://www.mewco.ca/blog/a-busy-summer-for-the-cra-auditors/
Based on initial reassessment letters prepared by the CRA thus far, the tax collection agency is taking a hardline approach and leaving it up to taxpayers to fight back at their own expense.
Anyone who owns a business knows it's difficult to keep a detailed driving log. The Income Tax Act is black and white on auto expenses – date, place, and purpose of the drive must be recorded in a centralized log. Otherwise, the auto expenses will be denied. Basically, auditing automobile expense deductions is a relatively easy way to collect more taxes.
For the first time in many years of practice, the chartered professional accountants at Mew and Company have seen a corporation assessed for a minor penalty of less than $200 for under-withholding income taxes from an owner/manager payroll.
In other words, the amount of income taxes under-withheld was less than $2000. Hence, in this case, if the business has to make up for the $2000 income tax shortfall, the shareholder will get to claim this amount as a credit on his personal tax return. Basically, it is a wash. Only the $200 penalty payable towards the CRA is a real expense to the corporation.
Once a delinquency is uncovered, it's possible that the corporation can be watched and given another payroll review, so it's best to be as transparent as possible.
Another matter attracting attention is how contractors are handled vs. employees in terms of tax treatment. Although this matter frequently attracts the attention of the CRA, this is the first year the team at Mew and Company has seen a reassessment. The taxpayer is part of the IT industry, where subcontractors are frequently used for short term projects. Out of a handful of subcontractors used by the CCPC, the CRA's decision was relevant to only one subcontractor who did not meet the self-employment test and hence should have been on payroll.
In this case, the remuneration under review was less than $20,000 for the six month period. As a result, the business will be assessed with CPP and EI premiums. Again, the assessed amount is not large enough for the taxpayer to incur professional fees to appeal.
It seems that the CRA is targeting abundant low-hanging fruit, and businesses have to be incredibly careful when preparing and submitting taxes to minimize the possibility of an inconvenient audit.
For more information on business consulting help with CRA tax audits, give the Vancouver professional chartered accountants at Mew and Company a call at 604-688-9198.
About Mew + Company
Mew + Company, Vancouver, is an ideal solution to the taxation problem. With a simple philosophy of building long-lasting customer relationships, the company has been serving corporate clients in a variety of fields—including restaurants, real estate, retail, and the service industry. Investing in their specialist services will undoubtedly be fruitful for all kinds of clients.
To learn more about Mew + Company and discuss their services, log on to https://www.mewco.ca/
Lilly Woo, CPA, CA, CFE, CFP
Mew + Company Chartered Professional Accountants
604 688 9198
Company Website: https://www.mewco.ca/
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