Tax Audits

There are relatively low percentage of wage and salary earners that triggers tax audit each year. This is because tax remittance is done by your employer each and every pay stub that you received. However, things get tricky when incomes from other sources are added. Income from investment, self employment, small businesses, home businesses, rental income and so on need to be reported while calculating taxable income. Onus is on the taxpayer to report the exact income from all sources, failure to do so will trigger not only penalty taxes but also civil penalties. At Cantac all our tax prepares have ethical responsibility to report incomes as informed by the taxpayer.
Tax reviews and audits are not the same. CRA routinely makes tax reviews to ensure that the information provided by the taxpayer is accurate.

Types of Reviews:

Pre-assessment Review Program

The CRA reviews conducted during this program take place before a notice of assessment is issued; usually during February to July. This review meant to be checked if the right deductions and credits are claimed by the taxpayer before issuing a Notice of Assessment.

Processing Review Program

Similar to the pre-assessment review program, this review conducted after the notice of assessment has been issued; usually from June to November.

Request Verification Program

This review conducted before a notice of reassessment is issued. In this program, CRA review the request to change return to make sure that the change requested is allowable and properly supported.

Refund Examination Program

This reviews conducted either before or after a notice of assessment has been issued. Reviews are carried out to ensure the proper refund is issued under the Income Tax Act.

Supplementary Examination Program

When detailed examination is required with regards to income/loss amounts as well as deductions SEP reviews are done. They can take place before or after a notice of (re)assessment has been issued.

Matching Program

In this program, information on your return is compared to information provided by third-party sources, such as employers or financial institutions.
Verification of employment income, investment income, CCB, GST/HST credit, RRSP deductions limit, Child care expenses, provincial tax credits and deductions are done through this program. This usually done during the month of September to March. t

Special Assessments Program

The special assessments program conducts a more in-depth review of income tax and benefit returns to identify and gather information on trends and situations in areas of non-compliance that may represent a risk to the self-assessment system.

Here are some common reasons when tax reviews are triggered:

  • Failure to respond to a request by the CRA
  • Change of mailing address
  • Not reporting all information slips
  • Inaccurate disclosure of retiring allowances (separation pay) received or transferred to a Registered Retirement Savings Plan (RRSP).
  • Registered Retirement Savings Plan (RRSP) deductions, unused contributions, Home Buyer’s Plan (HBP) or Lifelong Learning Plan (LLP) Activities” for amounts contributed.
  • Claim for Annual Union, Professional, or Like Dues.
  • Moving Expenses claim
  • Claim for Support Payments made.
  • Claim for Northern Residents Deductions.
  • Claim for eligible dependant amount.
  • Claim for infirm dependent 18 years of age or older amount.
  • Inappropriate claim for interest paid on a student loan.
  • Transferring of Tuition, Education, and Textbook amounts.
  • Medical Expenses claim
  • Federal Foreign Tax Credit claim amount.
  • Incorrect claim of provincial credit, such as Graduate Retention Rebate program in Saskatchewan