Introduction

For doctors and healthcare providers, patient care always comes first. But overlooking tax compliance can attract unwanted attention from the Canada Revenue Agency (CRA). Because of the way medical practices are structured, healthcare professionals are often subject to closer examination. At Dexado Accounting & Tax—led by a CPA and former CRA auditor—we know the warning signs CRA looks for and how to minimize risk. This article highlights the most common CRA audit triggers for medical professionals and how to safeguard against them.

1. Income Reporting: Match Revenue with Deposits

One of the first things CRA reviews is whether your reported income aligns with your bank deposits. Any unexplained deposit is typically considered taxable unless you have proof otherwise.

Best practices include:

• Use a dedicated business bank account—never mix personal and business funds.
• Deposit every payment, including cash.
• Reconcile your deposits with reported income each month using accounting software or spreadsheets.

Even small discrepancies can spark CRA inquiries, making consistency essential.

2. Expense Deductions: Stay Within CRA Guidelines

Travel Costs

Expenses for medical conferences, professional development, and patient-related travel are generally deductible. Personal vacations disguised as business trips, however, are an easy audit trigger.

Vehicle Expenses

This is one of the most common problem areas:

• Travel between your home and office is usually not deductible unless your home is your primary workplace.
• CRA requires a mileage log with date, distance, and purpose of travel.
• Apps make this recordkeeping much easier and more reliable.

Paying Family Members

Hiring family members is legitimate if the compensation matches actual work done. Keep job records, issue the correct tax slips, and maintain timesheets to support payments.

Home Office Claims

If part of your work is from home, you may be eligible for deductions on utilities, rent, or property taxes. To qualify:

• The space must be used regularly and exclusively for business.
• Claims should be calculated based on square footage.
• Keep supporting evidence like bills and photos.

Dexado helps calculate deductions accurately and ensures they align with CRA rules.

3. Personal Services Business (PSB) Risk

If your incorporated practice resembles an employer–employee setup, the CRA may classify your corporation as a Personal Services Business (PSB). This leads to higher taxes and fewer allowable deductions.

CRA will consider factors such as:

• Do you serve multiple clients?
• Do you control your schedule and tools?
• Do you rely on a single payer?
• Do you receive employee-style benefits?

Dexado reviews contracts and billing structures to help lower PSB risks and strengthen your independent contractor status.

4. Incorporation Risks: Goodwill Issues

Incorporating your practice can be beneficial, but if handled incorrectly, CRA may treat it as a sale at fair market value—including goodwill—which could trigger capital gains tax.

The solution is a Section 85 rollover, allowing you to transfer assets into your new corporation without immediate tax consequences. Our team assists with valuations, elections, and structuring to help you avoid this costly mistake.

5. GST/HST Compliance: Correct Classification Matters

Most medical services are GST/HST exempt, but not all. Misclassification is a frequent cause of CRA reassessment.

Examples include:

• Exempt: Routine physician services and therapy sessions
• Zero-rated: Some medical devices and exports
• Taxable: Cosmetic procedures, medical reports, and product sales

Incorrectly charging—or failing to charge—GST/HST can result in penalties. Dexado ensures your services and products are properly classified.

6. Why Medical Professionals Are Audited More Often

CRA often pays special attention to medical professionals because:

• Income levels are typically higher than average.
• Expense claims sometimes mix personal and professional use.
• Family members are frequently included on payroll.
• Practices often have multiple revenue streams, including insurance, private pay, and product sales.
• Many incorporations are done without proper tax planning.

These factors don’t guarantee an audit, but they do raise the risk—making documentation and careful planning essential.

7. How Dexado Protects Medical Professionals

Our CRA Audit Protection & Tax Planning Services include:

• Comprehensive risk reviews of tax returns and practice structures
• Guidance on deductions for vehicles, travel, and family employment
• Contract reviews to reduce PSB classification risks
• Structuring and filing assistance for incorporations
• GST/HST compliance checks
• Ongoing support with recordkeeping and documentation

At Dexado, we go beyond filing tax returns—we help medical professionals protect their practices from unnecessary CRA scrutiny.

Conclusion

A CRA audit can disrupt your practice, finances, and peace of mind. The best defense is proactive planning, accurate records, and expert advice. With first-hand insights from a former CRA auditor, Dexado Accounting & Tax understands what CRA looks for and how to minimize audit risks.