Written by Robin Taub
Monday, April 30th, 2018
One day in 2005, Amy (last name withheld for privacy) received a letter in the mail from the Canada Revenue Agency (CRA). The letter requested back-up documents to support rent she'd claimed on her 2004 tax return. "I was kind of freaked out," explained Amy. "Being 20 years old and getting this scary letter from the CRA telling me they wanted proof of something."
Are You Sure It's an Audit?
The Canada Revenue Agency (CRA) may contact you about a tax return you've filed at any time during the year, not just at "tax time." Don't panic and assume you're being audited. Unless otherwise stated, it's probably just a tax review.
What's a Tax Review?
The CRA reviews deductions and credits claimed on your tax return and can request additional information or back-up documents. Some reviews are done before the CRA issues your Notice of Assessment (pre-assessment review) and some are done after, within three years, like Amy's processing review. There are also matching reviews, in which the CRA compares information on your income tax return to information provided by third parties, like your employer or bank.
What Should You Do?
- Respond to the CRA within the specified time frame, usually 30 days from the date of the letter. If the CRA doesn't receive a response within that time, they'll adjust your claim based on the information they have, which may not be in your favour.
- Include additional information or supporting documents, making it as easy as possible for the CRA to review your response. If you're missing back-up documents, include an explanation as to why. Whatever you do, don't ignore the CRA's request.
- Include the reference number for your case, indicated on the letter or notice you received, so the CRA can quickly match the additional information you give them to your tax return.
Amy asked her landlord for rental receipts for her half of the rent and mailed them to the CRA. "I waited a long time, but I finally got a letter back saying they needed nothing further from me. My claim was allowed."
Another Letter From the CRA
In 2013, Amy got another letter from the CRA. This time, they requested additional information to support the moving expenses she'd claimed on her 2012 tax return. She relocated from Ontario to New Brunswick for work, and was claiming the portion of moving expenses that weren't paid for by her employer. "I wasn't as terrified this time because having been through it once, it wasn't as frightening," she said.
"They wanted tons of information, and at first I sent them a few items, thinking that would be sufficient. Then they came back and denied the claim. So I scanned every single page that could be relevant, proof of everything my employer paid for and receipts for everything I'd paid for, and uploaded a 50-page document. Better to give them too much info than not enough!"
In the end, almost eight months later, they allowed all but about $100 out of $2,000 in expenses.
What Can Trigger a Review?
While some tax returns are reviewed at random, there are also reasons why a return may be chosen:
- The information you filed with your return doesn't match information the CRA has. Even if you use Autofill my return, make sure the information imported matches your tax slips like T4s and T5s, and review your return carefully before filing
- There are unusual changes in your return this year compared to past years. These can be totally legitimate and arise from changes in your life circumstances, like Amy claiming rent for the first time, or incurring moving expenses. But remember, only claim the deductions or credits that you're entitled to
- If your return was reviewed in a prior year, and the CRA had to adjust a claim, you may be on their radar
A tax review may lead to an audit if the CRA isn't satisfied with the responses you provided to a review.
What's an Audit?
In a tax audit, the CRA examines your books and records to assess whether or not you've paid all the taxes you owe. Generally, the CRA can audit your tax return within 4 years of the date of the original Notice of Assessment. But if they suspect fraud, they can audit you at any time.
Ready for Battle!
Amy relocated back to Ontario for work about a year-and-a-half ago, and jokes that she's waiting for the CRA to review her moving expenses again. "I'm organized and hold onto things," she admits. "I'm even more diligent now about keeping receipts. I'm prepared for any battles they want to put me through!"