CRA Corporate Income Tax Audit — Montreal CPA Firm Near You: Defending Your Corporate Tax Compliance

A CRA Corporate Income Tax Audit involves a detailed review of your company's income tax filings to ensure that all income, expenses, deductions, and tax credits are correctly reported. During a corporate tax audit, CRA will assess your T2 returns and supporting documents to verify that your company has paid the correct amount of taxes and claimed eligible credits without misreporting or underreporting any taxable transactions.

Mackisen CPA Montreal specializes in defending corporate income tax audits by ensuring that all business expenses are properly documented, tax credits are eligible, and income reporting is compliant with Income Tax Act regulations. We provide comprehensive audit defense to minimize tax liabilities and penalties.

Legal Foundation

Income Tax Act s.9 — defines the rules for taxable income and business income for corporations.
Income Tax Act s.81 — outlines eligible deductions and business expenses for corporations.
Income Tax Act s.127 — provides details on corporate tax credits and eligibility requirements.
Jurisprudence: Soper v. Canada (1997 FCA) — establishes the requirement for accurate tax filings and deductions in line with income reality.

Learning insight: Corporate tax audits test not just your numbers, but the legality and accuracy of your income tax deductions and tax credit claims.

Why CRA Conducts Corporate Income Tax Audits

CRA performs corporate income tax audits to verify whether corporations have accurately reported taxable income and claimed eligible deductions. Common reasons for CRA audits include:
• large deductions for business expenses that seem disproportionate to reported income
• inconsistent income reporting between financial statements and tax returns
• misclassified expenses, such as personal or non-business expenses
• incorrect claims for tax credits, including SR&ED credits, investment tax credits, and employee credits
• undocumented or unverified deductions for capital expenditures, overhead costs, or assets
• discrepancies between corporate income and payroll filings, such as T4 slips or RL-1 forms

Learning insight: CRA audits often stem from discrepancies in tax filings or overstated claims. Accurate reporting and clear documentation are essential.

CRA Corporate Income Tax Audit Process

1. CRA sends an audit letter requesting the T2 corporate return, financial statements, income allocation schedules, and supporting documentation for any deductions or credits.

2. CRA verifies the accuracy of income reporting and ensures that eligible deductions (e.g., capital expenses, overhead) are properly documented and applied.

3. CRA examines tax credits and ensures they were claimed according to Income Tax Act provisions (e.g., SR&ED, investment credits).

4. CRA assesses whether the corporation has correctly classified expenses and taxable income.

5. CRA requests clarification on intercompany transactions and transfer pricing issues if applicable.

6. Mackisen CPA prepares a comprehensive defense package, including supporting documentation, clarification of income allocations, and proof of eligibility for any claimed tax credits.

Learning insight: Detailed documentation and clear income allocation will ensure successful defense during a CRA corporate tax audit.

Mackisen CPA’s Corporate Income Tax Defense Strategy

• review the T2 corporate return to ensure accurate income reporting and eligibility for deductions
• verify tax credits and ensure they meet the criteria defined by the Income Tax Act (e.g., SR&ED, investment tax credits)
• ensure expenses such as capital expenditures, overhead costs, and salary deductions are properly documented
• prepare a clear explanation for intercompany transactions and ensure transfer pricing is compliant with CRA regulations
• organize supporting documentation such as bank statements, contracts, invoices, and payroll records to provide transparency in case of an audit
• negotiate with CRA to resolve discrepancies and file amended returns or voluntary disclosures
• prepare a CPA-certified audit response and clarify misreported transactions to avoid penalties or reassessments

Learning insight: Clear documentation of business expenses and tax credit eligibility is essential in defending corporate tax audits.

Common CRA Findings in Corporate Income Tax Audits

• overstated or misclassified deductions for business expenses
• incorrect tax credit claims, particularly SR&ED or investment credits
• discrepancies between corporate income reports and financial statements
• failure to document capital expenditures, employee expenses, or business overhead
• misreporting of intercompany transactions or transfer pricing issues
• incorrect claims for non-business expenses, such as personal expenditures disguised as business expenses
• unfiled or incomplete T2 returns, leading to discrepancies between net income and taxable income

Learning insight: Proper expense documentation and clear income allocation prevent most CRA audit findings.

Real-World Results

• A construction company avoided a $500,000 adjustment when Mackisen CPA verified project expenses, capital asset deductions, and tax credit claims for their large-scale projects.
• A software development firm saved $200,000 in penalties when we reclassified employee expenses correctly and provided documentation to support SR&ED credits.
• A retail business avoided a $100,000 tax reassessment by documenting all deductions and providing transparency on sales revenue discrepancies.

Learning insight: Documenting deductions and submitting accurate tax returns ensures audit success.

SEO Optimization and Educational Value

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Secondary keywords: corporate tax deductions, tax credit eligibility, business expenses audit, CRA T2 return defense, tax audit negotiation, capital expenditures claims

Learning insight: Maintaining audit-ready records not only ensures CRA compliance but also boosts SEO by ensuring that your business is searchable and visible for tax-related queries.

Why Mackisen CPA Montreal

Mackisen CPA Montreal offers over 35 years of experience in corporate income tax audits, tax credits, and business expense documentation. Our bilingual CPAs ensure that your corporate tax filings and claims are well-documented, fully compliant, and defended during any audit. We help businesses maximize deductions while protecting them from CRA reassessments and penalties.

Learning insight: Proactive CPA defense minimizes audit risk and ensures that your corporate taxes are handled with confidence and clarity.

Call to Action

If CRA has audited your T2 return or you need help defending business expenses or tax credits, contact Mackisen CPA Montreal for comprehensive audit defense and documentation support.
Phone: 514-276-0808 | Email: info@mackisen.com | Website: mackisen.com

Learning conclusion: A CRA corporate income tax audit tests your tax compliance and business expense deductions. Mackisen CPA Montreal ensures that your T2 return is accurate, documented, and defended from audit adjustments and penalties.