Tax Return Reviews by the Canada Revenue Agency

Couple sorting taxes
Sorting Taxes. Tetra Images / Getty Images

Because the Canadian tax system is based on self-assessment, every year the Canada Revenue Agency (CRA) conducts a series of reviews of the tax returns submitted to see what mistakes are being made and to ensure compliance with the Canadian income tax laws. The reviews help the CRA to correct areas of misunderstanding and to improve the guides and information they provide to the Canadian public.

If your income tax return is selected for a review, it is not the same thing as a tax audit.

How Tax Returns Are Chosen for Review

Four main ways that a tax return is selected for a review are:

  • randomly
  • comparing tax returns with other sources of information, such as tax information slips
  • the type of tax credits or deduction claimed
  • the review history of an individual, for example, checking to ensure that an adjustment was made to a claim that was reviewed.

It doesn't make any difference whether you file your tax return online or by mail. The process of review selection is the same.

When Tax Reviews are Done

Most Canadian income tax returns are initially processed without a manual review and a Notice of Assessment and tax refund (if appropriate) are sent as soon as possible. That usually is done about two to six weeks after the CRA receives the return. All tax returns are screened by the CRA's computer system, though, and a tax return may be selected for a review later. As pointed out by the CRA in the General Income Tax and Benefit Guide, all taxpayers are required by law to keep receipts and documents for at least six years in the case of review.

Types of Tax Reviews

The following types of reviews give an idea of when you could expect a tax review.

  • Pre-assessment Review: These tax reviews are done before a Notice of Assessment is issued. The peak time frame is February to July.
  • Processing Review (PR): These reviews are done after a Notice of Assessment is sent. The peak time is August to December.
  • Matching Program: This program takes place after the Notice of Assessment has been sent. Information on tax returns is compared with information from other sources, such as T4s and other tax information slips. The peak period is from October to March. The Matching Program corrects the net income reported by individuals and corrects errors in a taxpayer's RRSP deduction limit and spouse-related claims such as child-care expenses and provincial and territorial tax credits and deductions. The Matching Program also covers the Beneficial Client Adjustments initiative which identifies under-claimed credits relating to tax deducted at source or Canada Pension Plan contributions. The tax return is adjusted and a Notice of Reassessment is issued.
  • Special Assessments: These tax reviews are done both before and after a Notice of Reassessment is issued. They identify both trends and individual situations of non-compliance. Requests for information are sent to the taxpayer.

How to Respond to a CRA Tax Review

In a tax review, the CRA first tries to verify the taxpayer's claim using the information they have from third-party sources. If the agency needs more information, a CRA representative will contact the taxpayer by phone or in writing.

When you respond to a CRA request, be sure to include the reference number found on the upper right corner of the letter. Answer within the time frame specified. Be sure to provide all documents and/or receipts requested. If all receipts or documents aren't available, include a written explanation or call the number on the bottom of the letter with the explanation.

If your tax return is being reviewed under the Processing Review (PR) Program, you may be able to send scanned documents online using the CRA's guidelines for submitting documents electronically.

Questions or Disagreements?

If you have questions or disagree with information received from a CRA tax review program, first call the phone number given in the letter you received.

If you still don't agree after talking to the CRA, then you have the right to a formal review. See Complaints and Disputes for more information.