Canada Revenue Agency

Canada Revenue Agency

January 25, 2008 15:26 ET

Canada Revenue Agency: Keep Your Records to Support Your Tax Return

OTTAWA, ONTARIO--(Marketwire - Jan. 25, 2008) - Canadians who plan to file their tax returns electronically, or who do not submit information slips and receipts with their paper-filed return, should keep their tax records on hand in case they are contacted by the Canada Revenue Agency (CRA).

Once tax returns are filed, the CRA begins work to verify the income reported, as well as the credits and deductions claimed. These reviews are an important way the CRA ensures that Canadians are paying their taxes. Last year, the tax returns of approximately 2.7 million individuals were reviewed and an additional $700 million in taxes was assessed by the CRA.

Some initial reviews of deductions and credits are conducted when returns are filed, and before taxpayers receive their Notice of Assessment. However, the majority of reviews take place later in the year, as the CRA works to verify the information on an individual's tax return and compare it with the information provided by other parties, such as an employer or a spouse or common-law partner.

During this review process, the CRA may contact taxpayers to request more information on income sources or dependants, and may ask for copies of receipts or information slips to support claims, including:

- medical expenses;

- charitable donations;

- childcare expenses;

- spousal or child support payments; and

- moving expenses.

Keeping your tax records on hand makes it easier to respond to these requests, and will help you explain your tax situation to the CRA if you do not agree with your reassessment.

Receiving a request for receipts or documentation does not mean you are being audited by the CRA. When an individual is selected for an audit, the CRA advises them that their tax situation is being reviewed and calls to arrange a meeting to begin the audit.

For more information about reviews of tax returns by the CRA, visit cra.gc.ca/reviews

FACT SHEET

The Canada Revenue Agency's review activities

The Canada Revenue Agency (CRA) wants to makes sure that you are paying the correct amount of taxes, not too much and not too little.

Completing your income tax return can sometimes be complex. The CRA conducts a number of reviews to ensure that income, deductions, and credits are accurately reported and filed. These reviews promote client education by identifying common areas of misunderstanding.

There are three main types of reviews: the Pre-assessment Review Program, the Processing Review Program and the Matching Program.

The Pre-assessment Review Program electronically analyzes individual income tax returns to identify situations that represent a higher risk of tax loss. Through this program, various deductions and credits on returns are reviewed and corrected before a Notice of Assessment is issued.

The Processing Review Program, occurring after a Notice of Assessment is issued, involves reviewing individual income tax returns to ensure that certain claimed deductions and credits are accurate and supported by documentation.

Canadians file approximately 25 (L1)million income tax returns each year, and all are electronically analyzed. Based on the analysis, returns are selected for review for one of two reasons: they are high risk, or they are selected as part of a random sample to measure non-compliance for the entire tax-filing population. Taxpayers who are being reviewed are notified by mail. If the review identifies an error, taxpayers will receive a new Notice of Assessment. If no error is identified, the taxpayer will receive a letter saying that no adjustment is necessary.

The Matching Program ensures that information slips filed by a third party, such as an employer or a bank, correspond to the information reported by the taxpayer. Payers and financial institutions submit a copy of all slips they issue, which are cross-referenced with the filed income tax return after a Notice of Assessment is issued.

All tax returns are matched to third party information slips. If there is a discrepancy between the income reported by the taxpayer and the income reported by the third party, the CRA may contact the taxpayer by mail or telephone for clarification. If it is determined that an adjustment is required after the review is complete, a new Notice of Assessment is sent to the taxpayer.

Each year, increasing numbers of taxpayers file their tax returns online using NETFILE or EFILE. Although electronic filers are not required to send the CRA their receipts, they shouldn't banish them to the recycling bin just yet! Taxpayers are required to send their receipts to the CRA if their returns undergo a review.

For tax year 2006, over 1.2 million tax returns were reviewed using the Pre-assessment and Processing Review programs and generated an additional $250 million in tax. The CRA also reviewed almost 1.5 million tax returns using the Matching Program, which recovered approximately $450 million in additional tax. Matching may benefit the taxpayer; almost a quarter of a million tax returns were adjusted resulting in close to $75 million in refunds.

For more information on the Pre-assessment, Processing Review, and Matching programs, visit the CRA Web site at cra.gc.ca/reviews

Contact Information

  • Canada Revenue Agency
    Beatrice Fenelon
    Media Relations
    613-941-6269