OK, this is really funny. No, seriously, you’re going to laugh out loud.
Hold on, I have to stop giggling so I can type!
OK, I have composed myself…So, here’s what happened – I was preparing this article to reassure people about their tax returns and letters from the Canada Revenue Agency, so you don’t panic when you get a letter requesting more information.
And then right in the middle of typing, I get a phone call from CRA, telling me I am being audited! How funny is that!
They want to look at my business expenses for two years, as a start. Since friends and colleagues at different investment firms have been going through such a process for several years, often with a stalemate on differences of opinion, I am actually not thrilled by this. While I have been laughing at the irony and the timing, an audit might not actually be fun.
Review versus Audit
The point I want to make today is that CRA requests for information are becoming routine, and are not really anything like an audit.
Since most of us now file our taxes electronically, CRA does not get to see all of the paper receipts that document things like charitable donations, medical expenses or back-up for other claims.
Therefore, the CRA needs to conduct regular reviews to assess the accuracy and voracity of people’s claims.
That’s why – and you’ll love this, too – I was asked last month for copies of all of my long list of donation receipts, and the background documents substantiating my $27 foreign tax credit claim. This was for 2016.
Then, this week, my wife got a similar letter from CRA, asking for a lot of the same slips and other material, related to her return. (There was no request for donation receipts, as we save a few dollars by claiming all on one return.)
So, if you get such a request, keep in mind it is likely just routine, and part of the regular review process. It might be a bit of pain to figure out where you hid last year’s tax return, but ultimately putting the documents together will likely be easier than it seemed at first.
Such a routine review is very different from an audit (which may try to consume the rest of my working life).
If you get a review request from CRA, here are suggestions from the CRA website, under the title, “What to do if the Canada Revenue Agency reviews your tax return.
1. Don’t panic.
2. Respond promptly (or contact them for an extension, if needed).
3. Keep all tax and related documents for at least six years from date of filing.
4. Read carefully the letter or Notice of Reassessment that CRA sends back. If they want money and you agree with them, pay promptly (or ask for a payment arrangement), as their interest rate is higher than a bank loan.
5. If you disagree with a reassessment, file an Objection within 30 days. However, you might still want to pay the requested amount, as interest and possible penalties will apply if you ultimately have to pay.
Consider registering for the CRA’s My Account. This sets you up with online access to all of your tax info, including Notices of Assessment and Re-assessment, status of returns, copies of slips that CRA is looking at then assessing your return, and ability to make payments.
One thing to remember is that when you register, you may then receive emails saying things like, “You have mail!”, which you then have to access through My Account, replacing paper notices.
And I thought the fun of preparing and filing my tax return was finished in April. How wonderful to know it will now go on all year round.
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Dollars and Sense is meant as an introduction to this topic and should not in any way be construed as a replacement for personalized professional advice.
Please consult legal, tax, insurance and investment experts for advice on your unique situation.
David Christianson, BA, CFP, R.F.P., TEP, CIM is recipient of the FELLOW OF FPSCTM Distinction, a portfolio manager and senior advisor with Christianson Wealth Advisors, a Senior Vice President with National Bank Financial Wealth Management, and author of the book Managing the Bull, A No-Nonsense Guide to Personal Finance.