It has been weeks since you submitted your personal tax return and you still have not received your Notice of Assessment. Finally, you receive a letter from the government which you expected to include your refund cheque. Instead, the letter is asking for additional information with regards to your recently filed return. What is this all about? Am I getting audited? The answer is likely no; Canada Revenue Agency (CRA) is performing a pre-assessment or processing review.
Pre-assessment reviews are issued before a Notice of Assessment is processed while processing reviews are issued after. They are exercises undertaken by the CRA to promote awareness and compliance to tax laws by educating the public about common misunderstandings and to make sure deductions and credits are appropriately claimed. This is to ensure that the tax systems’ integrity and public confidence in the system is preserved. It is important to understand that these are NOT tax audits. However, non-compliance during the reviews may lead to a tax audit at the discretion of the CRA.
The most common reviews we see are related to charitable donations, medical expenses, foreign tax credits, the claim of an eligible dependant, and income verification.
It is important that the instructions on these letters are read in full detail and that you respond within the requested timeframe (i.e. 30 days). Failing to respond with the requested information within the allotted time will lead to an adjustment to your return by CRA. Notice of Assessments will be significantly delayed if the requested information outlined in the pre-assessment review is not submitted in a timely manner. To minimize the processing delay of the Notice of Assessment if it is required to prove your income for a loan application, it is recommended to respond or inform your accountant of the pre-assessment review as soon as possible.
Sending CRA the requested documents after they have already adjusted your return can take months for them to correct. In addition, we have found that a non-response within the requested timeframe will significantly increase the likelihood of a review again the following year.
When responding, taxpayers should clearly indicate their reference number and tax year in question as specified in the review letter with their supporting documentation. Documents can be mailed or faxed to the address listed on the review letter. Taxpayers or authorized representatives may be able to submit the requested documents online using MyAccount or Represent a Client.
In some cases, a document may be unavailable within the requested timeframe. For example, perhaps you are claiming a foreign tax credit on taxes paid in the United States but the Internal Revenue Service (IRS) has not yet processed your return. In this case, you should call the number listed on the letter and ask for an extension. We have seen CRA grant extensions of up to 60 days.
Over the past few years, we have seen an increasing number of processing review letters issued in the Fall, well after taxpayers have received their Notice of Assessment. The same rules apply, as a non-response will lead to an adjustment and subsequent reassessment by CRA. As a precaution, it is recommended that you keep all slips, receipts, and other source documents for six years after you file your return.
If CRA disallows your claim for deductions or credits that appear reasonable, you do have the right to file a Notice of Objection to the Appeals section of the CRA. The Objection must be submitted within 90 days of the date of the Notice of Reassessment.
For more information, please contact Dan Nguyen at firstname.lastname@example.org or by phone at 647-508-5555 Ext. 105.