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(John Tomaselli/photos.com)
(John Tomaselli/photos.com)

Understanding Tax

What happens when your tax return is reviewed Add to ...

Understanding tax reviews and how to respond if your return is selected for a review.

The Canada Revenue Agency (CRA) may contact you about your tax return, and not necessarily just at tax time. This is called a tax review — it is not the same as a tax audit. But it may lead to an audit if the CRA is not satisfied with your response to the review.

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3 types of tax reviews

  • Pre-assessment review – After you submit your tax return, the CRA may review the deductions and credits you claimed. The CRA conducts these reviews before it sends you a notice of assessment and possibly a refund. These reviews usually take place between February and July.
  • Processing review program – This is similar to the pre-assessment review, except for timing. The CRA conducts these reviews after it sends you a notice of assessment, usually between June and November.
  • Matching program – These reviews take place after the CRA sends you a notice of assessment, usually between September and March. The CRA compares information on your tax return with information provided by third parties like your employer, banks or investment firms.

Tip: Make sure the information on your tax return matches the tax slips from your employer, bank or investment firm. This may help you avoid a review in the future.

Reasons for reviews

Some returns are selected at random for review. But the CRA may choose to review your tax return because:

  • The information on your return does not match information from third-party information sources, such as T4 slips from your employer.
  • The types of deductions or credits you claimed or your history with the CRA raises a red flag. Example: your return was reviewed in a previous year and the CRA had to adjust a claim.
  • There are unusual changes in your return compared to previous years. This could be as simple as making a much larger contribution to your RRSP or to charities, or having greater medical or childcare costs than you have had in the past.

Tip: Keep all your tax records for 6 years. Organize and file them by tax year so you can retrieve them easily in case you are ever reviewed.

If you’re selected for a review

The CRA will try to complete its review based on the information it has on file. If it needs more information, a CRA representative may contact you.

Five tips to help your review go smoothly

  1. Send your response within the specified time frame – This is usually 30 days from the date of the letter. If the CRA doesn't receive a response within that time, it will adjust your claim based on the information it has. This may not be in your favour.
  2. Include any additional information or supporting documents with your response – Organize the information and documents to make it as easy as possible for the CRA to review your response.
  3. Include an explanation for any missing supporting documents – Or, phone the office listed at the bottom of the letter to explain your situation. Do not just ignore the CRA's request.
  4. Make notes of your communications with the CRA – Include dates, and the name and agent ID number of the person you are dealing with. You may need this information later.
  5. Always include the reference number for your case – That way, the CRA can quickly match the additional information you give them to your tax return.

Warning: Do not ignore a letter from the CRA. If the CRA doesn't receive a response to its letter within 30 days, it will adjust your claim based on the information it has. This may not be in your favour.


 

Content in this section is provided in partnership with Investor Education Fund, a non-profit organization founded and supported by the Ontario Securities Commission that provides unbiased and independent financial tools to help Canadians make better money decisions. To find out more, go to: GetSmarterAboutMoney.ca

 

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