If the Canada Revenue Agency (CRA) selects your tax return for a review, you may need to submit additional documentation and answer a few questions to support your claim for a credit or deduction. This can be a simple process, as long as you know what to provide and how to provide it.
The Canadian Tax Review Process
The Canada Revenue Agency regularly selects tax returns for review.
Returns are selected for many different reasons, such as the types of credits and deductions that are claimed, the individual’s history with the CRA, or simply at random. According to the CRA, the review process promotes awareness and compliance with tax law.
A tax review is different from a tax audit.
An audit is a formal process in which the CRA analyzes a taxpayer’s return in detail. In contrast, a review is a simpler and more superficial look at the information which was submitted in a tax return.
Types of Reviews
There are four broad categories of tax reviews in Canada:
- Pre-Assessment Review: This takes place after the tax return is filed, but before your Notice of Assessment (NOA) or refund is issued. It consists of an overall look at the information provided by the taxpayer to ensure that there are no glaring inconsistencies and quite often requires you to submit documentation to CRA to support a specific credit or deduction.
- Processing Review: This review is similar to the previous, but takes place after your return is assessed and your Notice of Assessment (NOA) has been issued. Common information requests are for tuition receipts, medical expenses, and home office expense claims. As we file our income taxes without having to provide documentation, it is quite common for the CRA to request to see documents where you have a significant change from previous years. If you have a high claim amount of expenses such as medical expenses, significant moving expenses or charitable donations, you should be prepared for a Request for Information from the Processing Review section and have your documents ready to submit to the tax centre which has made the request.
- Respond to the request in a timely manner; do not ignore these requests. If you ignore these requests or do not respond by the due date on the letter, you will likely be reassessed and your claim for that particular credit or deduction denied. If you need more time to gather your documents for submission, you can call the number for the tax centre shown in your letter and request an extension.
- Matching Review: This review consists of ensuring that the information provided by the taxpayer matches the information that has been obtained from third parties. For example, the CRA will check to certify that the employment income and deductions reported match the amounts on the T4 – Statement of Remuneration submitted to CRA by the employer.
- Special Assessments Review: In these reviews, the CRA conducts a more in-depth review of the income tax return in areas identified as potentially problematic. All requests for information in this program are sent directly to the taxpayer. This includes taxpayers who have authorized someone to act on their behalf, such as a tax preparer.
How the Review Works
If your return is selected for review, the CRA will first attempt to complete the analysis with the documents they already have on file. If more information is required, you will be contacted by telephone or in writing, and asked to provide the necessary information within a given time frame. For example, you may be asked to provide copies of receipts for items you purchased and that you seek to deduct as business expenses. Whenever you submit documents, be sure to clearly identify them and keep copies for your own records.
With the number of CRA scams and phone calls from these scammers posing as CRA agents who threaten to take legal action, it’s important that you verify the agent’s validity.
- Ask for, or make a note of, the caller’s name, work section, and office location and tell them that you want to first verify their identity.
- You can then check that the employee calling you about your taxes works for the CRA or that the CRA did contact you by calling 1-800-959-8281 for individuals or 1-800-959-5525 for businesses.
Documents can be filed with the CRA either by mail, fax or electronically.
- If submitting by mail or fax, it’s important the documents are sent to the Tax Centre which initiated the request. Clearly indicate the reference number you have been provided in a cover letter and if you have a specific CRA agent you are dealing with, be sure to state “Attention to” and their name.
- If you prefer to scan the documents and submit them electronically, you can log into the CRA’s My Account online service and click on the Submit Documents button in the Quick Links section on the left side of the page. You will be asked to provide a reference number, which can be found on the CRA’s request for information letter.
Make sure to keep copies for your files, and it’s always wise to let the person or tax centre at the CRA know that you have responded to the request sent the documents, and maintain communication with them while the situation is being resolved. More information on tax reviews can be found through the CRA’s My Account service and on their website in this link CRA “Review of your tax return by the CRA”