Business Avoids Audit Through Compliance Overhaul

A Montreal small business was on the brink of a tax audit after receiving multiple warning signs from Revenu Québec: late filings, inconsistent GST/QST reports, and mismatched sales deposits. Instead of waiting for an audit to strike, the owner acted quickly and the result was a full compliance turnaround that prevented an audit entirely.

This success story shows how proactive measures, guided by expert support, protected the business from penalties, frozen refunds, and stressful audit procedures.

The Warning Signs Were Already There

Revenu Québec had flagged the business due to:
• repeated late GST/QST filings
• unusual refund patterns
• sales totals not matching bank deposits
• inconsistent use of tax codes in accounting software
• missing documentation for expense claims
• prior verification letters

These are classic indicators of an upcoming audit.

The business was at a critical crossroads: fix the issues now or face a full-scale audit.

Step 1 — Comprehensive Compliance Diagnostic

Mackisen performed a full review of:
• bookkeeping accuracy
• GST/QST settings in accounting software
• reconciliation of deposits vs. recorded sales
• documentation for all ITCs/ITRs
• discrepancies in prior returns
• POS and e-commerce settings

This revealed multiple risk factors that needed immediate attention.

Step 2 — Rebuilding Bookkeeping and Documentation

The team:
• cleaned up months of transactions
• reclassified personal vs. business expenses
• rebuilt sales schedules
• downloaded and organized missing supplier invoices
• corrected duplicate or misposted entries
• prepared accurate tax credit/refund schedules

By the end of the cleanup, the books reflected a true picture of the business.

Step 3 — Fixing GST/QST Tax Coding Errors

Before the overhaul, the accounting system had:
• incorrect GST-only entries
• missing QST coding
• improper handling of zero-rated or exempt transactions
• inconsistent tax treatment across suppliers

Mackisen standardized every tax code, ensuring error-free reporting moving forward.

Step 4 — Filing Corrected Returns

Corrected FPZ-500-V filings were submitted that:
• fixed tax calculation errors
• aligned with reconciled sales and deposits
• supported ITCs/ITRs with complete documentation
• removed discrepancies that previously triggered warnings

These filings signaled to Revenu Québec that the business was now compliant.

Step 5 — Proactive Communication with Revenu Québec

Mackisen contacted Revenu Québec directly to:
• explain the compliance overhaul
• address previous inconsistencies
• confirm that corrections were made
• avoid escalation into an audit

Transparency and professionalism were key.

The Outcome

The business:
• avoided a full GST/QST audit
• incurred no penalties
• had all future refunds processed normally
• restored its compliance status
• regained peace of mind
• implemented permanent bookkeeping controls

Revenu Québec did not pursue further verification a direct result of proactive cleanup.

Key Lessons

• Warning letters shouldn’t be ignored they are audit precursors
• Proactive cleanup is far cheaper and easier than dealing with audits
• Standardizing tax codes prevents future errors
• Clean, reconciled books reduce your audit footprint
• A CPA can intervene before issues escalate

Client Quote

“I knew something was wrong, and I couldn’t sleep. Mackisen fixed everything before Revenu Québec took action. I’m so relieved.”

Common Questions

Can audits really be prevented?
Yes strong compliance and proactive filings reduce audit triggers.

What happens if I ignore verification letters?
They often lead directly to audits.

Can I fix years of inconsistent filings?
Yes reconstruction and corrections are common.

Do corrected filings raise red flags?
Not when done properly and supported by documentation.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses avoid audits through proactive compliance, reconstruction, accurate filings, and strategic communication with tax authorities.