I started writing this blog in September, 2009. At that time, there was very little useful information about restaurant tax audits in Canada (or anywhere). In the 42 articles that I have written so far, I have tried to fill this gap with practical information geared towards restaurateurs. Based on the comments I’ve received from a number of readers, I think I have succeeded. There still isn’t much useful information about restaurant tax audits, other than what you will find in this blog. That’s a shame, but it keeps me motivated to continue helping as many restaurateurs as I can.
Posts Tagged ‘Audits’
Posted in Taxes, tagged allowances, Audits, Canada Revenue Agency, Canadian Restaurateur, Customer comps, shrinkage allowance, spillage, tax auditors, tax audits, theft, tips and gratuities, zappers on July 10, 2012| Leave a Comment »
Posted in Canada Revenue Agency, GST, HST, Income taxes, Sales Tax, Taxes, tagged Audits, Canada Revenue Agency, Canadian Restaurateur, CRA, Customer comps, excise tax act, GST, harmonized sales tax, HST, Income tax, POS, Sales Tax, tax auditors, tax audits, Taxes, technology on June 20, 2012| 9 Comments »
I’ve written a couple of articles about Groupon on my sister blog, Canadian Restaurateur. This is part of a series that will cover accounting for Groupon certificates, setting up your Point of Sale (POS) system to properly track coupons and discounts, using QuickBooks to enter Groupon transactions, examining the tax treatment of Groupon certificates (this one), and finally, determining whether your restaurant should consider Groupon.
I’m certainly not saying that all, or even a significant number, of CRA’s tax auditors are corrupt, but this story in the Montreal Gazette highlights some very interesting issues surrounding restaurant tax audits.
The corrupt tax auditors seemed to focus on restaurants, knowing that they could “justify” large reassessments, unless the owners paid them bribes. In at least one case, the auditor asked for the bribe before auditing the restaurant! Finally, the auditors could just as easily make a restaurant appear to be reporting all of its income as it could make it look like they were evading large amounts of tax.
An RCMP investigation of Canada Revenue Agency employees has resulted in three former auditors being accused of shaking down restaurant owners for cash.
There are about 80,800 restaurants in Canada (CRFA), and about half are audited every four years. That’s a lot of restaurants being audited, and you just know that the majority of them receive reassessments at the end of each audit.
Rather interestingly, there are only about 10 significant court cases involving restaurants that had been audited using the mark-up method. How can this be?
Many restaurant owners think they’re protected from the tax auditors, simply because they have a good accountant. While that’s true in some cases, just about every restaurant that gets hit with a tax audit reassessment (and usually a large one at that) had a “good accountant”!
In Canada, every restaurant that appealed tax audit reassessments in court had an accountant. In the U.S., many states publish details of tax appeals by restaurants (informal tribunal appeals, roughly equivalent to Canadian appeals by Notice of Objection). There are literally thousands of cases and virtually every one had an accountant. In the vast majority of cases, the restaurants lost their appeals. I’m sure most of these restaurants thought that their accountant would protect them from these tax reassessments.