Small business taxes: Get it right, from the start

Wouldn’t it be great for your small business if you knew that you were doing things right before you filed your taxes? With the Canada Revenue Agency’s Liaison Officer Initiative, you can.

The Canada Revenue Agency’s (CRA) voluntary Liaison Officer Initiative (LOI) aims to help small businesses comply with their tax responsibilities through timely support and education.

For small business owners who participate in the program, liaison officers conduct onsite visits as well as books and records reviews, to help fix problems that can lead to errors and non-compliance. This means you’ll spend less time, effort and money figuring out your tax obligations and entitlements.

While you might be wary about giving CRA people access to your financial data, it’s important to remember that the LOI operates separately from the CRA’s audit programs. Liaison officers are not auditors, and they do not generate leads for CRA auditors to follow. The focus is on helping small businesses get their taxes right from the start, targeting start-up businesses that are one to three years old.

Following a successful test run, the LOI was made permanent for income tax matters in 2015. By the end of 2016, the CRA had contacted over 50,300 taxpayers to enlist them in the program and attended over 15,500 visits. Based on a follow-up survey of participants, experiences with the program have been overwhelmingly positive:

  • 99 per cent of respondents said the service gave them a better understanding of their taxes
  • 99 per cent said that the liaison officer could answer all their questions
  • more than 93 per cent agreed that the visit would be useful to other businesses

Upcoming enhancements

The CRA is building on this success with some welcome enhancements to the program:

  • Since 2016, a new pilot program has been helping small businesses with information about payroll trust accounts and GST/HST requirements, in addition to income taxes. In the future, the CRA also plans to expand the LOI program to owners of small corporations (i.e., T2 tax return filers).
  • Small businesses can now request assistance on their own. Rather than waiting for the CRA to initiate a visit, small businesses will be able to sign up for the program directly through the Liaison Officer Assistance Request pilot project, which launched in November 2016 in the greater Montreal and Toronto areas. Qualifying small businesses in those areas that make a request will be offered a seminar or in-person visit.

This initiative is just one of the ways that the CRA is promoting better compliance through education and guidance, in addition to its more traditional audit and enforcement activities.

Keep the conversation going

If you’ve had any experience with the LOI, I’d like to hear from you. Are there other ways the CRA can help taxpayers get their taxes right before they file?

CPA Canada’s Tax Blog is designed to create an exchange of ideas on tax policy and practice issues, and their impact on those who practise tax. Your comments can provide helpful input into the public interest advocacy positions developed by CPA Canada.

About the Author

Gabe Hayos, FCPA, FCA, ICD.D

Vice-president, Taxation, CPA Canada