Filing your taxes can be stressful, and the thought of having your return reviewed by the Canada Revenue Agency (CRA) might feel even more daunting. Understanding why the CRA might review your return and how to respond effectively can make the process far less intimidating. This guide explores the common triggers for a CRA review, what to expect, and how to handle it successfully.
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What Is a CRA Review?
A CRA review is not the same as an audit. Think of it as a routine quality check. The CRA conducts reviews to ensure the accuracy of filed tax returns and compliance with tax laws. These reviews can be random or triggered by specific factors in your tax return.
Common Triggers for a CRA Review
Unusual or Large Claims
Significant deductions or credits compared to previous years may raise red flags. For instance, if you suddenly claim a much larger charitable donation than usual, the CRA might want to verify it.
Mismatch of Information
The CRA cross-references your tax return with information provided by employers, banks, and other institutions. A mismatch—for example, reporting income that doesn’t align with your employer’s T4—can trigger a review.
Self-Employment or Business Income
Self-employed individuals often face additional scrutiny due to the complexity of their tax filings. Deductions for business expenses, particularly for travel, meals, or home office use, are frequently reviewed.
High-Risk Deductions
Certain claims, such as medical expenses, tuition credits, employment or moving expenses, are prone to review because they require specific documentation and can be prone to error or misinterpretation.
Random Selection
Sometimes, returns are chosen at random as part of the CRA’s quality assurance measures.
How to Handle a CRA Review
Stay Calm and Organized
A review doesn’t imply wrongdoing. It’s an opportunity to clarify and verify information. As the saying goes, Keep Calm and Carry On.
Read the CRA Letter Carefully
The CRA will send you a letter detailing what they’re reviewing and what documentation they need. Respond by the deadline provided.
Gather Documentation
Assemble all the required documents.
For example:
- Receipts for expenses (e.g., charitable donations, medical costs).
- Contracts or invoices if self-employed.
Ensure Accuracy
Double-check your records to ensure they align with your original tax return.
Communicate Promptly
If you need more time to gather documentation, contact the CRA before the deadline to request an extension.
Seek Professional Help
If the review involves complex issues, consult a tax professional or accountant to ensure you provide accurate information.
Winning the CRA Review
Success in a CRA review means providing all requested information accurately and promptly. If the CRA determines your claim was valid, the review will be closed with no adjustments to your return. If adjustments are made, and you disagree, you have the right to file an objection within 90 days of the reassessment.
If you or someone you know are being reviewed by the CRA, remember to reach out to Accent CPA for trusted advice and peace of mind when dealing with the CRA.