When you receive a letter or call from the CRA after filing your personal taxes telling you that your income tax return is under review, don’t panic. It is important to know that this is a tax review and not a tax audit. The CRA sends about 200,000 of these letters each year, and in most cases it’s just a routine check to make sure the information you’ve provided on your return is correct. Since tax returns are completed on a voluntary disclosure basis, these reviews are to ensure the accuracy of your tax return, while increasing public confidence in the CRA’s fairness.
RANDOM SELECTION
The process for selecting a return for review is the same whether the return is filed on paper or online (EFILE and NETFILE). CRA refines the focus of the review each year based on the review results and identified areas of non-conformity. While some tax audits are selected at random, most are “using a complex system of factors to identify the most likely misstatements”.
COMMON REASONS FOR REVIEWS:
- The information on your return does not match the information received from a third-party source (e.g. T3, T4, T5 slips)
- The type of deduction or credit you are claiming
- Your compliance history
- Random checks
TAX DEDUCTIONS THAT ARE EASILY REVIEWED INCLUDE:
- Moving expenses – Line 21900
- Other deductions – Line 23200
- Northern Resident Deduction – Line 25500
- Amount for eligible dependents – Line 30400
- Tuition – Line 32000 of Schedule 11
- Tuition, education and textbook amounts transferred from children – Line 32400
- Medical Expenses – Lines 33099 and 33199
- Non-business income taxes paid to foreign countries – Line 43100 of Form T2209
- Ontario property taxes or rent paid – Part A of Form ON-BEN
KEEP YOUR RECEIPTS AND RECORDS
The CRA requires all your tax documents to be kept for at least 6 years from the date you file your tax return. If you have claimed a fee, deduction or tax credit, make sure to keep all receipts and related documents in case the CRA asks to see them.
When receiving a letter or notice from the CRA, taxpayers should:
- Carefully read the letter
- Each notice or letter contains a lot of important information, and each notice deals with a specific issue and contains specific instructions on what to do, so please read it carefully.
- Stay calm and collect documents
- Make sure your documents contain all the information the CRA requires and that your copies are legible.
- If the document you are providing is in a foreign language, the CRA requires a copy of the original document written in the foreign language with an acceptable English or French translation. A translation usually certified by an official (commissioner for oaths, notary public, or lawyer) authorized to administer an oath or solemn declaration.
- Provide documents and reply in time
- If a notice or letter asks you to respond within a specific date, please respond within the time specified in the letter. Attach the Reference Number of the tax bureau and your SIN number to the reply letter.
- Please send all receipts and/or other documents that are relevant to the CRA, you or your authorized representative can send scanned documents to the CRA online using Personal Account or Customer Representative.
- If it takes more than 30 days to prepare, please call the relevant tax inspection department of the CRA on the last page of the inspection letter. If you cannot provide the receipts or documents needed to support your tax return, explain your situation in writing or by calling the CRA.
- Keep copies for archival records
- It is important to keep copies of all CRA notices and reply letters, as well as tax records, as you will need these documents for future enquiries.
- If the tax inspection letter is not replied within the required period, CRA will issue a Notice of Reassessment to make adjustments to the taxpayer’s personal tax and subsidies, reassess, and withdraw part of the subsidies that have been issued.
OUR SERVICE
Our personal tax customer service includes the reply and tracking of the tax bureau inspection letter after processing personal tax returns, which will relieve all your troubles. If you need help with any tax issues, please contact Nancy Jin & Associates Corporation and we will work with you to resolve any questions or concerns you may have.