Text review can be both simple and serious, as long as you know what to provide and what you need to know. If the Canada Revenue Agency (CRA) chooses your tax for a review, you may be required to submit additional documentation and answer a few questions.
What exactly is the Canadian Tax Review?
Tax returns are frequently chosen for review by the Canada Revenue Agency.
Following tax filing season, some Canadians receive a pressing letter from the CRA informing them that their taxes are being reviewed. Often, the review will be difficult, especially if you are required to submit the summoned documents by a certain date. There is nothing to be concerned about; simply go over the information you need to know if you have been selected for a tax review in Canada.
Remember! A tax review is not the same as a tax audit.
A tax review is not the same as a tax audit. An audit is a proper system in which the CRA thoroughly examines a taxpayer's history. Depending on their suspicions, the CRA may seize four or more years' worth of your tax returns. Tax review, on the other hand, is a less complicated and more superficial examination of the information submitted in a tax review. It's just a standard procedure, which means the Canadian government requires additional documentation from you. However, if you comply with the CRA demand and they are satisfied, you are less likely to be audited in the future.
What is the purpose of being reviewed?
There are numerous factors that CRA considers when selecting an account for review. Reviews are specified for a variety of reasons, including the types of credit and deductions claimed, the person's history with the CRA, and others. The CRA issues a tax review warrant due to a variety of errors.
Furthermore, individuals are chosen at random for conformity review. The purpose of this review, according to the Canadian government, is to "ensure that amounts are reported accurately and that they are adequately supported." That doesn't mean you've done anything wrong with your taxes. It's essentially a fact-checking system, not an articulation.
You should be aware of the various types of reviews
The reviewing process is divided into four stages:
The Pre-Assessment Review stage is as follows:
This happens shortly after you file your tax return, but before you receive your Notice of Assessment (NOA) or refund. In this process, the facts provided by the taxpayer are thoroughly examined to ensure that there is no obvious divergence. And, in particular, requires you to submit documentation to the CRA to support a specific credit or deduction.
Examining the Process:
It occurs after your return has been assessed and your Notice of Assessment (NOA) has been issued. Tuition receipts, clinical expenses, and home office rate claims are examples of common information requested. Because we file income taxes without providing documentation, it's quite common for the CRA to request peer documents where there has been a significant change from previous years. If you have a large claim amount of expenses, such as medical costs, extensive moving expenses, or charitable donations, you should be prepared to receive a request for information from the Processing Review section. Then you should be prepared to submit your documents to the tax center that made the request.
Basically, in this section, ensure that the facts supplied by the taxpayer correspond to the data obtained from a third party. For example, the CRA will examine the employment income and deductions suggested to ensure that they correspond to the amounts on the T4 – Statement of Remuneration submitted to the CRA by the organization.
Review of special assessments:
In areas identified as potentially troubling, the CRA conducts a more in-depth examination of the income tax return. All requests for facts in this information are sent to the taxpayer without delay. "A tax preparer" is a person authorized to act on behalf of a taxpayer.
Always respond to requests on time
Do not disregard these requests. If you ignore these requests or do not respond by the due date on the letter, you will almost certainly be reassessed and your claim for that specific credit or deduction will be denied. If you need more time to gather your documents for submission, you should request an extension.
Should you need to hire an agent?
Yes, you must hire and verify the agent's legitimacy. If the CRA discovers any irregularities, there is a chance that you will be audited. As a result, it is best to avoid risk and take the safest route. Also, make copies for your files, and it's always a good idea to let the person or tax center on the CRA know that you've responded to the request for sent documents and to keep in touch with them even if the issue is resolved.
Contact us today, and our professional accountants will gladly assist you in making the best decisions for you.