The dreaded personal tax audit! Canadians often live in fear of that audit letter arriving in the mail or hitting their email inbox. So, I’m often asked what might trigger a CRA review. The reality is that while the odds of being audited are relatively low, there are common audit red flags on personal tax returns that can increase your risk. In this video, I walk through the issues that I see raising questions most often—from real estate transactions to unusual expense claims—and share practical tips on how you can minimize unwanted CRA attention on your personal tax return.
Video Transcript: Audit red flags on personal tax returns: Stop triggering them
Have you ever opened your mailbox and discovered an audit letter from the CRA?
First, a reality check.
The odds of being audited are still admittedly fairly low.
But there are red flags that can attract CRA’s attention. And in some cases, these are easy to avoid if you know what to watch for.
Let’s review some tips for individuals who want to avoid these audits.
1. Audit red flag: Real estate sales
So one. Be careful with real estate sales. Not to say don’t do them. But selling a property shortly after buying it, or after some significant renovations, it raises red flags, especially in major cities such as Toronto and Vancouver.
2. Audit red flag: Income and expense changes
Two, watch for major shifts year to year. Sudden changes in income, medical claims, support payments. These can trigger a closer look.
3. Audit red flag: Offshore assets
Three, be cautious with offshore assets. First time declarations of foreign assets often get flagged for pre-assessment reviews. They want to check, make sure. Perhaps you should have been claiming these earlier for exactly what’s going on.
4. Audit red flag: Income outside neighbourhood norm
Four, don’t report income way outside the neighborhood norm, unless, of course, it’s higher. If your income looks much lower than your neighbors, it may be inviting some extra scrutiny.
Get more help to avoid audit red flags on personal tax returns
Want to learn more or get your taxes audit ready? Contact me using the description below.
I’m George Dube, saving the world from tax, one bow tie at a time®.
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Resources
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Remember – circumstances are unique! This information is summary in nature. Seek out advice from your tax advisor about your specific situation.