The CRA sometimes uses an auditing technique called a net worth assessment. It is typically used to detect unreported income. This involves determining the increase in a person’s net worth over a period of time and then examining the person’s sources of income, expenses and financial resources to determine whether the income as reported can reasonably account for the change in net worth. The CRA is making increased use of this approach, and assessments can be very prone to error. Penalties of 50% are normally added together with interest.

When asked to undertake the defence of a client who is subject to a net worth assessment, we:

• meet with the client to determine the true facts;
• review the CRA’s working papers to determine any obvious errors;
• negotiate with the CRA to obtain a full reversal or a  reasonable settlement of the amount in dispute, which may involve filing a notice of objection and discussing the matter with the appeals division; and
• involve legal counsel to assist us where the amounts involved are large or where criminal allegations are made.

We have developed our own software to replicate the CRA net worth calculations and test the assumptions used.

We normally undertake this work only on a retainer fee for service basis.