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.
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
- 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.
- 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.
- 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.
- 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.
- 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.
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