Most often CRA T1 reviewers are correct with respect to employment expense audit result.
However, they are not forthcoming with clarification if and when the taxpayer failed audit for some technical reason.
We seem to missing some information by the original poster about what information was requested by the CRA Auditor and what was provided by the taxpayer or tax preparer.
Nonetheless I stand by my observation that there is a huge gap been the accuracy and fairness of a newbie auditor vs one with tons of experience. After 21 years in professional tax preparation, including many in very high volume firms, plus one season at CRA I now double check the audit requirements as well as the original sources in the ITA, ETA, and in third party references. My eyes were opened wide when my CRA training included some deep dives in the CRA audit manual. Without disclosing private and confidential information, what I had learned at CPA firms and at high volume tax prep firms was very different than how we were taught at CRA.
The basis is the ITA and/or ETA.
Then administrative policies are used to interpret the Acts.
Sometimes guides, bulletins, or folios are provided to clarify the topic.
Examples are illustrated.
Then these policies are applied in a technical and sequential order.
You must apply these in order.
If you fail any step then the audit fails on a technicality.
You must meet the minimum documentation requirement. But sometimes the minimum is insufficient and you have to provide more information. Sometimes you provide conflicting information which results in an audit failure.
This may be as simple as a T2200 was not provided, or, that a kms log was not provided. Or, that a T2200 was not available but the employer refused to provide one even though the employment contract required business use of a personal vehicle. Sometimes that kms log was inaccurate or incomplete.
There are often surprises during an audit or filing requirement that the tax preparer may not previously know.
For example if you file as GST Return and the period end had been changed due to an ARB Assessment, then you must use the ARB period or your GST Return will be “cancelled” and shown as never filed.
There are other somewhat surprising rules such as marital status for tax purposes is not the same as marital status for legal purposes. For example, if you are legally divorced, and if you have minor children living with you, and, if you then allow you ex-spouse to live with you then you are consider to common law with your spouse for tax purposes.
Sometimes it is a case of where is the benefit of doubt given. Previously father’s were continually audited year after year to prove that the dependent child or children lived with Dad even though there was joint custody. Dad had to prove the number of days the child or children were under his control and living with him.
These types of issues are often part of CRA program. So… if you know the technical requirements of how to pass audit in a specific program then you might help you client understand these requirements.
At other times the issue may be complex. For example, taking a terminal loss on a rental property when that rental property was change of use from residence to rental and later sold at a loss when compared with valuation at the change of use. It took three submissions and assistance from a senior assessor to get this approved even though all the supporting documentation was provided.
Assessors and auditors are human. They work under a lot of pressure. They can make mistakes. So, it is worth the follow-up if one is so inclined and if the scope of work and the amounts warrant the effort.