Reality: Tax Audit Risk for Business Owners

Evelyn Jacks

Small business month is coming to an end, but there is one issue rarely discussed in the news for this important sector of our economy: tax audit risk. If you’re in business, it’s a reality that you are in an audit target zone and you need to be ready because it can be very expensive. That’s why it’s a year end planning issue we’ll be discussing in depth at the November 5 CE Summit featuring tax lawyer Anna Malazhavaya. Registration is still open online until November 4. Here’s what’s important:

SMEs: The Tax Audit Risk is Sharper. Anna will share that the CRA has greatly expanded their tax audit powers through the amplified use of both digital data processing and more targeted an invasive audit powers. “Strictly mathematically (and unscientifically) speaking,” she says, “a small business has 0.5% chance of being audited but a medium business has 7.8% chance of being audited.”

Of the 69,000 audits and compliance actions undertaken in 2023-2024, the government won in a big way: there was a $15.3B in fiscal impact, with about half of that coming from larger business audits.

Significant Uncertainty. There is still considerable uncertainty given that the Budget 2024 proposals, and the more recent August 15, 2025 draft legislation is as yet unpassed. Will the new proposed rules give CRA increasing powers to enter premises, conduct oral and written interview with the taxpayer and multiple unnamed third parties, demand any document, answer any questions under Oath or Affidavit, and issue a Notice of Non-Compliance which comes with significant penalties based on the taxes CRA thinks the taxpayer owes? When will they start?

Back to Basics. What’s important is that financial advisors of all stripes – tax consultant, accountants and financial services professionals – help their clients keep their eyes on the business owners’ requirement under law to keep proper books and records. “If something is not a “book” or a “record”, says Anna, there may not be an obligation, but the devil is in the details.

Bottom Line: In a highly uncertain time, there is certainty around the fact that CRA has big data capabilities and enormous powers to extract more taxes, penalties and interest from targeted taxpayers, particularly business owners and the “wealthy”. 

Professionals working with these taxpayers won’t want to miss this important CE Session, which also qualifies for up to 20 CE credits from Knowledge Bureau and CIRO, MFDA, ICM, and AIC. 

Register now  

In addition, shore up your understanding of Corporate Tax filing Fundamentals, Accounting in a Digital World, Owner-Manager Compensation Planning, Business Valuation and Succession Planning. 

Check out the Professional Development options with Knowledge Bureau’s certificate courses.