It’s the time of year when the Canada Revenue Agency (CRA) moves from the assessment of income tax returns to post-assessment reviews.
There are currently two programs for post-assessment reviews.
The Processing Review Program is a review of deductions and credits claimed. Common reasons for a return to be reviewed under this program can include:
- your return contains claims in areas where taxpayers are more likely to make errors (e.g. medical, support payments, legal fees);
- your deduction or credit is significantly different from that claimed in previous years;
- or you were randomly selected.
The Matching Program matches the information reported in your return to that submitted by other sources, such as comparing your T4 inputs to the T4s submitted by your employer.
Under both programs, the CRA is verifying the validity of your claim, which could result in them requesting supporting documentation.
If the CRA does require additional documentation as proof of your claim, they will send a letter. This letter will include a list of documentation that the CRA requires and/or the amount for which there appears to be differences. The letter will also give a reasonable amount of time in which you are required to respond.
Remember, the CRA will never email taxpayers or request payment for taxes owed by wire-transfer or pre-paid credit card. They will also not threaten that failure to make payment will result in arrest, imprisonment or deportation – these scare tactics will only be used by scammers.
If you receive correspondence from the CRA requesting additional documentation, you will want to do the following.
1 - Don’t panic
Under the Processing Review Claim, there is no way to verify a taxpayer’s claim without seeing the required documentation. Being contacted by the CRA under either program does not necessarily mean you have done something wrong or that changes will be made to your return. It simply means that the CRA wants to verify that you have not unintentionally (or in some cases intentionally) provided incorrect information.
Under the Matching Program, you will only be contacted if there is a material discrepancy between the information you reported and that which was reported by the third party.
While this can be a bit more concerning, it is important to remember that you are simply being contacted so that you can provide an explanation. If your return was filed properly, nothing should happen because of the review process.
2 - Contact a chartered professional accountant
By responding quickly and contacting a chartered professional accountancy to do this for you, such as Koroll & Company, you will speed up the process and eliminate the risk of you missing the response deadline - which could result in a reassessment, even if your claims are legitimate.
If no response is received, the CRA has to assume that the required documentation or records do not exist.
If the due date is fast approaching and you have not contacted the CRA, they may send a follow-up letter or reach out via telephone (using the phone number you have on file), but you don’t want to depend on this.
An accountant will ensure that your response includes the reference number provided in the CRA’s letter, a written explanation and any documentation requested by the CRA. They will then mail this to the address provided in the letter you received or online using your My Account.
For more information about the review process or help getting together the proper documentation to validate your return, contact us today.
