As a taxpayer, one should always be informed about one’s tax responsibilities. This includes filing tax returns on time, paying tax liabilities, checking all notices and mail received from the tax authorities, responding to those that require a response, and maintaining record of past years returns and other relevant documents for a certain period of time, since it is tough predicting when one could be subject to a tax audit.
However, along with maintaining record of past tax filings and other tax-related documents for any possible tax audits or re-assessments, it is also necessary to maintain documents submitted to the tax authority during an ongoing tax audit; which some taxpayers may not be unaware of.
Here is a brief overview of how a taxpayer should maintain record of documents of an ongoing tax audit and why is it necessary:
What documents should you keep?
AG Tax recommends that when it comes to a tax audit, taxpayers should maintain record of every request from the auditor, as well as any documents that have been provided. If the audit continues for a long time frame, it may become difficult to keep track of information requested and shared.
Helpful tips for maintaining tax audit documents
Prepare a list (excel file) of the requests of the auditor, date a request was made, documents provided to the auditor, notes about information provided along with the document, name of the electronic document and its location on the hard drive.
Maintain a binder with hard copies of all the documents provided to the auditor and a USB key with any electronic documents provided to the auditor.
Following the above steps makes it easy to clarify any disagreement with the tax authority regarding a reassessment or audit. Also, if a binder is maintained of the documents shared and associated with the tax audit, it is easier to make copies when all the necessary documents are maintained in the same organized place, and provide to the tax court if necessary. Doing so also makes the process less time-consuming.
Additionally, in the case of corporate taxpayers, it could happen that during the course of an audit, there is a change in bookkeepers. Having the relevant data in one place will make it easier for the new bookkeeper to understand the situation, and save time that would have been spent of recreating the document trail.
Having said that, tax situations can be highly complicated and due to the amount of paperwork involved it is also time-consuming, therefore sorting out documents and maintaining records often eases the process and helps save time that may be utilized to further analyze the tax situation. It is highly recommended that a taxpayer should consult a tax professional if they have received a notice from the tax authority (CRA or IRS) and maintain a chronological report of all the data shared with and received from the tax authority from there onwards.
AG Tax LLP Can Help
If you have any questions regarding cross-border tax audits, tax related queries, or need assistance with tax planning or filing please contact us. Our tax professionals are highly-experienced with U.S. and Canadian tax laws and can provide you the right guidance to handle even your most complex tax situation.
Aylett Grant Tax LLP is a full service accounting firm with a dedicated team of experts, who are highly-qualified and experienced in handling situations related to U.S., Canada and other international tax laws.
We can assist with:
- Canadian Personal and Corporate tax returns
- Cross Border Taxation and Business Planning
- U.S. Personal and Corporate Taxation
- Disclosure of Foreign Assets and other information filings
- Retirement planning
- Estate Planning, Inheritance tax advice
To obtain a quote or to arrange for a consultation to discuss your tax related queries, please contact us at:
- 416-238-5920 (Greater Toronto Area, ON)
- 604-538-8735 (Greater Vancouver Area, BC)
- 780-702-2732 (Greater Edmonton Area, AB)
Disclaimer: The information in this publication is accurate as of the time of its publication. AG Tax assumes no responsibility for changes to tax legislation subsequent to the publication of this document. The information provided is for general information purposes only and should not be acted upon without seeking professional advice. If you would like to engage our services, please contact our staff and obtain authorization to send our firm confidential information. A client relationship is not created by the transmission of information. A client relationship is only formed with our firm when a scope and engagement letter signed by the firm and the potential client detailing the terms of engagement is present.
