Since the start of the pandemic, several employers have benefited from
various COVID assistance programs.
-19 implemented by governments, including the Canada Emergency Wage Subsidy (“CESS”). With an estimated cost of over $100 billion, the various applications for the
SSUC
has enabled several companies to continue their operations, despite the constraints imposed by COVID-19.
How to prepare for an SSUC tax audit by the CRA
Now that the SSUC program has been terminated as of October 23, 2021, theCanada Revenue Agency (“CRA “) is stepping up tax audit requests to verify that all program rules have been properly applied.
Tax audit request process
The CRA’s verification process is based primarily on the elements used to calculate the subsidy, such as the entity’s eligible revenues, recorded salaries and the choices made by the entity in relation to the various periods. Companies subject to an audit must therefore provide all documents supporting the amounts claimed, such as trial balances, payroll records and spreadsheets used in the claim process.
If your company has benefited from the SSUC program, you may receive an audit request from the CRA. The CRA’s audit requests can be very succinct and targeted, or exhaustive and concern a multitude of items.
Deadline
If your company is subject to a comprehensive general audit, you will receive a letter from the CRA detailing the documents required to verify the amounts claimed. In the event of such a procedure, and within
30 days following the date of the letter
you must submit the following list of documents to the CRA.
List of documents required for CRA tax audit request
In particular, these documents must be submitted to the CRA (note that this list is intended as an executive summary and is not exhaustive):
- Documents from the company’s minute books that could be related to applications for the Canada Emergency Wage Subsidy;
- The list of entities and companies in the corporate group;
- Income information for the 2019, 2020 and 2021 tax years, including complete general ledger data, trial balances and a host of other documents supporting the entity’s income;
- Detailed work documents justifying the calculation of eligible income, the reduction in income determined and the compensatory percentage applicable for the various periods;
- Documents describing the revenue recognition policy and its geographical sources;
- A wealth of information on payroll and subsidizable wages, such as payroll books by pay period and by employee, manual calculation data that harmonizes irregular pay periods with weekly periods for SSUC purposes, employment contracts with employees’ social insurance numbers, bank statements, and proof of payment to employees;
- Signed copies of the certificates produced for the periods under review.
Support
Providing the requested information is crucial to the processing of your business file with the government. It is therefore essential for the entity to produce complete and adequate information that will corroborate the subsidy applications produced. Before submitting this information to the CRA, we recommend that you ensure that the entity’s file is complete and error-free. To do so, we invite you to consult our related article on this subject entitled “4 tips for tax auditing emergency benefits”.
Be aware that this type of government audit may be subject to other containment support programs offered under COVID-19. To find out more about Canada’s grants, read our articles on the following programs:
If you’d like us to help you prepare for such an audit, we’ll be happy to assist you.
