CRA Income Tax Review
A CRA review is not a tax audit. The biggest difference between a tax review and a tax audit is that a tax review may be completed in a matter of weeks, but an audit can take months or even years to complete.
A tax review is simply a routine check to ensure that the information that you have provided on your income tax return is correct. CRA can contact you for additional information with a letter or a telephone call. We want to assure you that individuals are less likely to be selected for a review than businesses because the deductions submitted are usually much smaller than those for a business.
Do not take it personally, if you are chosen by CRA for a tax review. CRA reviews about three million income tax returns annually to ensure that the income amounts, deductions, and credits are accurately reported and are correctly supported with documentation.
There are several reasons why CRA selects income tax returns for review. They include:
· The information provided on your return does not match other documentation such as your T4s from employers or T5s from financial institutions.
· It is dependent upon the types of deductions or credits that you claimed.
· Your compliance history with CRA. If you were not compliant in the past, or did not provide supportive documentation when requested, you are more likely to receive a review request.
· Reviews are also based upon random selection of income tax returns.
It is important that you keep all your income tax records, all receipts, and documents that support your claims for at least six years (from your tax return filing date), in case CRA chooses your return for review. CRA can also request cancelled cheques and/or bank statements as proof of your deductions and credits that you have claimed.
How to Manage an Income Tax Return Review
Step #1: Respond to CRA’s query by sending all the information that they have requested as soon as possible. By doing this promptly, you eliminate any delays that might occur because of a delayed response. You can contact CRA by going to Responding to us - Canada.ca or by calling CRA immediately using the number provided in your letter from them so that you are talking directly with the person who sent you the request for information. Should you be concerned about the phone number provided in the letter, you can contact CRA at 1-800-959-8281 and verify that the number provided in the letter is authentic. If you don’t reply, CRA may adjust your income tax return and your deduction or credit may be declined.
Step #2: If you don’t have your documentation, advise CRA immediately and look for other ways that you might be able to provide the necessary documentation. For example, bank records, seeing if the vendor who provided the service initially can provide a copy of the original receipt, etc.
Step #3: When you receive a “request for supporting documents letter”, you will be assigned a due date. If you are unable to provide the documents by the due date, call CRA immediately to explain why there is a delay in sending your documentation and to request a time extension on your deadline.
Step #4: Don’t assume that since you have not heard from CRA, that the issue is resolved. It is important for you to do your due diligence by regularly checking your snail mail, email inbox, voicemail and check your online mail at your “My Account” on the CRA website. It is for this reason that it is so important that if you move, change your email address, or get a new phone number, that you update CRA with the new information.
Or to simplify this whole process, you can have K & E Professional Accounting Associates do your income tax and provide you with a virtual record of your income tax return with scans of all your receipts attached. In this manner, you are guaranteed to never lose your documentation of your income tax return. To talk to a professional about this issue, email our accounting specialists at email@example.com .