What Personal Records Can The CRA Legally Investigate During A Business Audit?

If your business has been selected by the Canadian Revenue Agency (CRA) for an audit, there are a large number of documents and records that they will require from you during their investigation. For the most part, it will focus on business-related documents: receipts, accounts, bookkeeping, and so on.

CRA Audit

It’s important to note, however, the the CRA also can legally access a number of personal records during their audit. If you want to make sure you’re as prepared as you can be for a CRA audit of your business, refer to this quick guide. It will help you get the following personal records ready.

Personal Finances

The first thing that the CRA will want to look at is your personal financial records. This is to make sure you are not hiding any business income in your personal finances to avoid paying taxes, among other reasons. It’s important that you stay on top of your personal finances and have clear, accurate documentation of the following:

  • Bank statements — any checking or saving accounts you have, such as Tax Free Saving Accounts, RRSPs, investments, etc.
  • Mortgage documents — all up to date documents about the state of your mortgage including past payments, readjustments, or reinvestments
  • Credit card statements — any credit cards or lines of credit you personally have including previous payments and debts
  • Other accounts — trusts, foreign real estate, foreign taxes and accounts, etc

Having all of these in order goes a long way to showing the CRA you have nothing to hide. Be prepared to go to your bank and credit company to pull all these necessary financial records of your personal finances for the CRA.

Your Family’s Personal Records

One thing you might not know is that the CRA not only has the legal right to investigate your personal finances when they are auditing your business, but also the personal financial records of your family members. In this case, family members can include:

  • Your spouse: the most common person related to you that the CRA will want to investigate
  • Your children: if they are old enough and have accounts and personal finances of their own, including their college funds or trusts
  • Your parents or siblings: not as common, depending on how close a relationship they have with your business

This is to make sure you are not using their accounts or finances to hide business income and expenses for the purpose of avoiding or paying less tax. If you receive notice that your business is going to be audited by the CRA, it is a good idea to give your family a heads up in case they need to get their own financial records in order.

Other Individuals & Groups Relevant To Your Business

In addition to your own personal finances and those of your close family, the CRA will also look into the personal financial records of other individuals and groups of people. This can include the following:

  • Partnerships: any co-owners or other individuals who are involved with the business
  • Bookkeepers & Accountants: checking any adjustments they have made to your accounts
  • Trusts & Trustees: especially those related by family or by business involvement in the CRA case
  • Corporations: individuals at other companies or corporations only if they are involved with your business

When the CRA investigates the finances of the above, it can include both business or corporate accounts as well as personal finances. In such cases it really depends on how involved they were with your business, specifically with what triggered the CRA audit in the first place.

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