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.
Here’s a bold statement: tax auditors don’t know your business.
It’s true! You know it, I know it, even the tax auditors know it!
As a result, you may think you have an advantage over the tax auditors. Unfortunately, you don’t. What tax auditors lack in knowledge they make up for by making assumptions about your restaurant. Often, these assumptions are nothing more than the tax authority’s decisions to use certain “standards”. For example, the “industry average” shrinkage allowance for draft beer (or liquor, or wine). Here’s a surprise: there isn’t one! In almost every case, the tax auditor makes assumptions that are not favourable to your tax position, leading to large tax reassessments.