Companion Advisor: Taxes
Your tax return is filed - what happens now?
Every year you file your tax return with the Canada Customs and Revenue Agency (CCRA) by April 30 (if you report business income on your return, you and your spouse have until June 15 to file). Have you ever wondered what happens with your return after you've submitted it?
The first thing that the CCRA does when it receives a return is look for a cheque. If one is attached to your return, it is removed and cashed. Your return is also taken apart and reassembled in "CCRA format," although most returns prepared by a professional tax advisor are already assembled in this format.
The CCRA generally processes returns on a first-in, first-out basis, and categorizes returns by their level of complexity.
After the returns are sorted, they are keyed into Revenue Canada's computers. E-filed and net-filed returns are processed more quickly than paper returns, as they do not have to go through this keying stage.
Validation of Returns:
Before any assessments are issued, your return is "validated" by CCRA employees. They compare your return to your filings in prior years to look for any changes in your circumstances, or unusual items in your return. This may prompt the CCRA to ask for more information to support a particular item on your return. Returns deemed "risky" may be held back for further review prior to assessment.
All returns undergo a post-assessment review: T -slips that have been filed by your employer or your bank will be matched to your return to ensure that they have been included. Your return will be linked to returns filed by family members to ensure that credits are properly claimed.
If discrepancies arise, the CCRA will correct your return and issue a notice of reassessment, or contact you for clarification. These requests often target certain types of deductions claimed on returns, for example, moving or child care expense claims. It's not a good idea to attach these types of receipts to your paper filed return in an attempt to avoid a request for the receipts later. They won't check your return for these receipts, and you'll no longer have them should the CCRA ask for them.
The CCRA will also randomly verify certain claims on e-filed or net-filed returns, since many of the slips filed with paper returns aren't attached to electronically filed returns.
If you get a letter requesting receipts, don't worry. It's just part of the Department's follow-up procedures to ensure that your return has been correctly filed. Usually, unless you ignore the letter, your return will not be adjusted.
Returns Selected For Audit:
Each year, some tax returns are selected for audit, most commonly, a return that reports business income or rental losses, or returns for salespersons deducting expenses.
If you've been selected for audit, don't panic. If your records are in order, this should be a straightforward process. A professional tax advisor can help guide you through the audit process.
We thank BDO Dunwoody LLP, Chartered Accountants & Consultants for the reprinting of this article, which was originally published in The Business Executive, April 2002. More information is available at www.bdo.ca.
Agents Financial Services Group are not engaged in rendering tax, accounting
or legal professional services or advice. The comments in this article are not
intended, nor should they be relied upon, to replace specific professional advice.
Before acting on material contained herein. Readers should seek advice that
is appropriate to their personal circumstances from a professional advisor.
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