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When your tax return is being reviewed…

You filed your income tax long time ago in April, you paid your tax bill and even received a notice from Canada Revenue Agency (CRA) confirming your tax assessment and payment. You assume that your 2011 file is closed and go off to your regular, non-tax related activities of life. And all of a sudden you find in your mail box another letter from CRA that start as follows: “we regularly conduct review programs as an important part of the self assessment tax system…”

If you find yourself reading that letter, do not panic. This is not a full audit of your tax return, but rather a review of certain deductions or credits that you claimed. The review process is part of CRA’s routine that takes place after the returns have been processed and assessed. It starts in June and lasts until late fall. Each year CRA selects a number of most common deductions and claims for tax credits and requests supporting documents. The following claims are most commonly reviewed:

- day care costs

- property tax / rent paid

- tuition and education amounts

- charitable donations

- public transit passes

- medical expenses

Also, if your claim for any of the above items is unusually high, for instance when you had some major dental expenses paid out of pocket, CRA will want to confirm them with your original receipts. It should be noted that such reviews are NOT more common for electronically filed returns, just because no paper documents were submitted.

The letter that you received specifies which items are being reviewed and then lists documents that need to be submitted, usually within 30 days of the date of the letter. It is important that you respond within specified time period with the requested information. Otherwise, CRA will assume that you do not have appropriate supporting documents and will re-assess your return denying your claim.

You may want to contact your accountant who prepared your tax return for advice on what documents to submit and how to submit them. Here are a few points to consider when submitting documents to CRA:

- always make copies in case documents you send by mail get “misdirected”

- consider sending documents by fax, as specified in the letter, AND obtain fax confirmation that transmission was successful

- read carefully what is required, eg. if the letter asks for proof of payment for your property tax, then make sure you send either copies of cheques (front and back), bank statements showing actual payments, or statement showing “amount paid”

- when submitting forms for tuition and education amounts make sure to sign them and fill out transfer to parent or spouse instruction if applicable

In case you need more time to prepare your documents contact CRA and ask for extension of time. But by all means, do not ignore the letter or let it sit in your “TBD” drawer for too long.

Eva Kupiec, CMA

Beata Kurpiewski, CGA

Principals of Professional Accounting Office at 3461 Lakeshore Blvd. W.

www.beaccounting.ca