Occasionally, the Canada Revenue Agency (CRA) contacts taxpayers to clarify details on their tax returns. The process for selecting the taxpayers to contact can be completely random, or your return may be selected for a special reason. Regardless of why the agency reaches out to you, it’s critical to respond as soon as possible with the requested information. Pay attention to the date they have requested the information by, and if you are unable to fulfill the request by that date, contact them explaining your situation and you can request an extension.
CRA has a number of Review Programs and it’s also important that you respond to the correct CRA department that is administering that particular program.
Responding to the CRA
The CRA may contact you to ask for more information regarding your income tax return. When you respond, you should submit all of the requested documents, and you should include a cover sheet noting your reference number.
Your reference number appears in the upper right-hand corner of the notice you received from the CRA. The address of the CRA office that is handling the request and the time frame in which you need to return the info also appears on the notice. It’s important that you submit your documents to the right office as quite often the office differs from your “Tax Centre” where you submit your tax returns.
More info can be found in this CRA article: Canada Revenue Agency: “Responding to us”.
How to Submit Your Documents
- If you are a CRA My Account holder, you can scan the required receipts or other documents and submit them online via your CRA My Account.
- You may also submit your documentation by standard mail.
- You can submit the documents by fax if you have been provided with a fax number in the request letter.
Again, it’s very important that all correspondence is made with the tax centre which has sent the request for information. Respond by mail to that particular address, and if sending documents by fax, be sure to send to the fax number provided and include your reference number.
Records to Keep on File
Unfortunately, it’s impossible to predict what type of information the CRA may request from you. To prepare for a variety of situations, you need to keep records to support anything you report on your return.
For example, if you claim a tax credit for medical expenses or charitable donations, make sure you keep all of your receipts to back up your claims.
Similarly, you should also keep tax information slips you receive from your employer (T4s), the administrator of your pension plan (T4As), financial institutions (T3s, T5s, T4RIFs, T4RSPs, etc), or almost anyone else who issues you income. Since you have these slips, you don’t need to keep items (such as pay cheque stubs) if you are confident the slips have been prepared correctly. If there are any discrepancies, you should keep all documentation to back up your claim as explained in this TurboTax link: What Can I Do if I Think My T4 Slip is Not Accurate?
If you have any expenses or records that are unclear or ambiguous, ensure that you keep detailed notes. In case of a review or audit, these notes could be essential at explaining the expense, why it was incurred, and how it qualifies for a deduction or a credit.
Ignoring the Request for More Information
If the CRA contacts you and you fail to respond, the agency may adjust your income tax return and reassess you for taxes owed, as well as penalties and interest. In addition, the agency may mark your return for further review and subject you to an audit. In fact, one of the easiest ways to trigger an audit is failing to comply with the CRA’s request for more information.
Other Audit Triggers
In addition to non-compliance with requests for more information, there are a number of other situations in which an audit may be triggered. For example, if you are self-employed, you are more likely to be audited than people who have a separate employer. In particular, if you claim high home office deductions or write off 100 percent of your vehicle for business purposes, you are increasingly more likely to be audited.
When reviewing tax returns, the CRA also scans for discrepancies. It looks for massive changes in your income from year to year, but also looks for similarities or marked differences between your return and returns from other people who live in the same area.