By Jeffrey R. Roy CPA, CA
A letter from the Canada Revenue Agency (CRA) is not a slight of your honesty or integrity. The truth is, Canada’s tax regime is built on the principle of self-assessment. As the CRA cannot review every tax return, it focuses attention on those taxpayers that may have self assessed their true taxable earnings below their actual world-wide income. Below are some of the characteristics the CRA may use to isolate off-side filers:
- Self-employed individuals working in an industry that is heavily cash-based;
- Reporting recurring and/or significant rental or business losses;
- Have dramatic swings in income or expenses between the prior and current year;
- Income does not match the postal code they live in;
- Tax slip matching performed by the CRA isolating income that does not match the individual return;
- Investments, property or bank accounts outside Canada;
- Recently sold real estate and claiming the principal residence exemption;
- Requesting adjustments to a previously tax return or
- Somebody raising their name to the CRA through their Investment Leads program “Snitch-Line”
If you have received a CRA letter after filing your 2018 return. Take a deep breath and open the letter, it is likely a tax review notice seeking support for an expense or tax credit. This is the most common letter sent by the CRA. If no reply is received, the CRA may deny the item and issue a reassessment.
The request is likely only for backup to support a tax line item, the letter will explain what documentation is needed. Simply copy the receipt and send it to them. For more complicated CRA requests, collect the requested receipts, organize them logically and build a package demonstrating why you are entitled to the amount in question. Otherwise seek professional help to resolve the issue.
The CRA has a secure on-line portal that allows you view tax/benefit information and receive email notices when changes or notices are posted to your account. If you are subject to a tax review or audit, information can even be uploaded to the site to hasten the resolution of an issue or notice. For more information on this service, visit www.canada.ca and search for My Account.
At Vulcan we believe it is also prudent to explain how the CRA communicates with taxpayers. Scammers posing as CRA employees mislead individuals into paying false debts, causing individuals to ignore legitimate CRA attempts to contact them. The CRA will never demand payment by prepaid gift cards, cryptocurrency, e-transfer, cash or other non-traceable medium. When payments are made, they are never done in public places, sent to post-office box numbers or addresses outside of Canada. Nor will the CRA ever use an outside organization to collect outstanding taxes or threaten jail time or arrest.
If contacted by someone claiming to represent the CRA, ask for the caller’s agent ID. Every CRA employee has an ID; it is a 6-digit number with a 3-letter suffix. This number ties the individual to a location or office. All CRA employees are required to provide this information upon requested. To confirm if the caller is a legitimate CRA employee call 1-800-959-8281 and provide them with the agent ID. If the information does not agree, the caller is misrepresenting themselves. While on the phone, also ask if there is any issue with your tax account.
If you have received a CRA letter, unsure about how to resolve the matter or have a personal tax issue, contact Vulcan Investments. We can coordinate a meeting with one of our tax advisors and work with you to remedy the matter.