Tax Reviews in Canada: What You Need to Know
What is a tax review? It’s not an audit, but when the CRA selects businesses for tax reviews in Canada, it’s serious business. Here’s what you need to know.
After tax filing season, many Canadians check their mailboxes expecting to be greeted with money owed to them by the government in accordance with their returns. However, quite a number of them will be disappointed to see a pressing letter from the CRA explaining their taxes are under review instead.
The review process may appear daunting, especially because you may be asked to submit requested documentation by a specific date. Most of the time, there’s no reason to go into panic mode. Let’s go through information you need to know if you’ve been selected for a tax review in Canada.
Why Am I Being Reviewed?
The CRA takes many factors into account when picking who to review. These include the kind of deductions and credits you’ve claimed on your tax returns as well as prior experiences with the CRA (if any). Here’s list of common errors made on tax returns that could warrant a review, provided by the CRA.
Additionally, citizens can be picked to comply with a tax review at random. The purpose of these reviews, according to the Canadian government, is to “ensure that amounts are reported correctly and that they are properly supported.” Essentially, it’s a fact-checking mission, not an indication you’ve done anything nefarious regarding your taxes.
Am I Being Audited?
No. It’s important to understand that tax reviews are different from audits, and much less severe. An audit is a formal investigation that examines your tax return. The CRA can look through four years (or more, depending on their suspicion) of your tax returns. Roughly 30,000 taxpayers will be audited every season. Tax reviews are more common, given the broad and mild circumstances that can trigger them, and far less serious. They just mean the Canadian government wants additional information from you. In fact, tax reviews can be seen as beneficial in some cases; if you comply with the CRA’s requests and they are satisfied, you are less likely to be audited in the future.
Can I Ignore a Tax Review?
If you are asked to submit information, make sure to do it within the allocated time given by the CRA. Most of the time, it’s 30 days after initial contact. If the CRA doesn’t get an adequate reply from you before the deadline they gave you, your claim will be altered to match the amounts they have on file. For most people, that means they’ll be collecting less money than expected.
Should I Hire a Professional?
Yes. This is an especially crucial step for those who operate small businesses. Tax reviews can prevent audits. However, the opposite is true if the CRA is unsatisfied with what you submitted and suspect fraud. If the CRA feels malfeasance is present, there’s a chance you’ll then move on from being reviewed to being audited; a significantly more worrisome situation. It’s best to take the safest route and not take any chances.
E&E Professional Accountants have extensive experience dealing with reviews commissioned by the CRA. Contact us today and we will be happy to assist you in making the right decisions to come out unscathed.
[cta id=”663″ vid=”0″]
- Best Practices When Forming a Business Partnership in Ontario - April 26, 2022
- Before Closing Down a Business in Ontario: Everything You Need to Know - April 26, 2022
- Self-Employed VS Personal Services Corporation — Definition & Tax Implications - February 16, 2022