Canada’s tax system is based on self-assessment, therefore, every once in a while the Canada Revenue Agency (CRA) must conduct reviews or audits to ensure you’re filing correctly. Each year, the CRA conducts a number of review activities that promote awareness of and compliance with the laws it administers. These reviews are an important part of the compliance activities CRA undertakes in order to maintain the Canadian public's confidence in as well as the integrity of the Canadian tax system.
There are a number of reasons why an income tax return may be selected in one of CRA’s review programs. These reasons include:
The process of selecting returns for review is the same whether the return is filed on paper or electronically. Therefore, the chances of a return being selected for review are not impacted by the method used to file the return. We refine the focus of our reviews annually based on review results and problem areas identified.
Most income tax returns filed each year are processed within two to six weeks. The CRA processes most returns without conducting a manual review of the information reported so that a Notice of Assessment and/or refund can be issued as quickly as possible. However, all returns are screened by the CRA’s computer system and may be subject to review at a later date.
Even in this electronic age you should keep all receipts and documents to support your claims for at least six years in case you are selected for review. And, in a format that CRA can access, such as PDF or Word files. If you’re a small business, keep all your accounting data backed up and have one for each year.
I would say that 90% of tax returns slated for review are just random, however, there are some things that can trigger a review, or even an audit.
If your return is selected for review, the first thing is don’t panic. The second is to read the letter carefully, determine exactly what it is they’re reviewing, and find the documents they’re seeking (only give them what they asked for, and nothing more). You have nothing to worry about as you’re organized and have all your documents in a safe place, and easily accessible for just such occasions.
What is the Gig Economy?
The Top Mistakes New Freelancers Make
Five Ways That you can Work from Home
Five Skills You Need to Learn Before Starting Your Own Business
Tried and True Ways to get your Small Business Organized
It’s Almost Back to School Time – Have you Thought About a RESP for your Child?
How to Avoid Hidden Costs When Travelling Part 2, Travel Prep, Accommodation, Touring and Eating
Credit Card Terms That You Should Know