Tax returns under review by the CRA? Here’s what you need to know.

Apr 11, 2022 | Personal Tax and Finance

A man in a grey suit with a red tie opens a letter. He looks shocked at the document that he just pulled out of the envelope—it is a letter letting him know that the CRA is reviewing his tax returns.

Filing your taxes is stressful. And if you’ve got a lot of expenses and credits to claim, extra forms to file, or other complex tax issues to deal with, you probably felt relieved when you finally finished them off, never to be thought of again until next year rolls around.

Until, that is, you received a letter saying your return is under review by the CRA. As if the ghost of your taxes came back to haunt you, just when you thought you were done with them.

If you’ve had this happen to you, it’s normal to feel a lot of anxiety or concern. But—good news—there’s really nothing to worry about. Whether you’ve got an accountant or you filed your taxes on your own, dealing with a CRA review is actually pretty straightforward. 

Here’s everything you need to know about CRA reviews:

A review is NOT the same as an audit

If you’re thinking that the review of your tax returns is going to be an in-depth, extensive examination of your books, records, and receipts, you may be thinking of an audit, rather than a review.

A review is generally just a routine check of your returns to ensure that the info you provided is correct. It’s not usually too time consuming, and, if you submit the additional documents as requested in a timely manner, it will likely be all over and done within a month or two.

A review doesn’t mean you did anything wrong

A woman sits at a desk in front of a laptop. She has thrown her hands up in frustration and is looking annoyed at her screen.

Getting a letter from the CRA saying your returns are under review can cause a lot of anxiety. It’s easy to feel like your returns were selected because you did something wrong. Did I fill out a form incorrectly? Did I claim something I wasn’t supposed to? Do I look suspicious to the CRA?

The reality is, there is a fair amount of randomness to the three million tax returns that are selected for review each year. While some do get flagged based on inconsistencies (e.g. the info you provided on your return doesn’t match the info from a third party source such as a T4 slip), most often returns are not selected because the taxpayer made a mistake when filing them.

Your returns could have been filed perfectly and still go under review to double check for accuracy.

Here are a few reasons why your return might have been flagged for review:

  • You have a significantly higher amount of medical credits claimed than you did last year
  • You claimed a large number of donations compared to previous years
  • The amount of child care expense claims on your returns is significantly higher than the previous year
  • You claimed a foreign tax credit

Your returns can also be reviewed three or four years after they were filed, so be prepared to revisit old tax returns if necessary. It is best practice to hold on to the supporting documents you used to prepare your tax returns for seven years.

What to do when under review

Two people sit on a couch, flipping through documents on their laps.

If you’re handling your taxes on your own, the letter you receive from the CRA notifying you that your returns are being reviewed will have a detailed list of instructions. You’ll likely need to submit additional documents and information within 30 days of the date on the letter. 

Follow the instructions carefully, and if you’re unsure about anything, it’s probably a good idea to consult an accountant. It’s important that you submit everything the CRA needs the first time around to avoid time-consuming reassessments.

If you filed your taxes through an accounting firm like RHN, your accountant may already have everything they need on file to handle the review on your behalf. If not, they’ll contact you to ask for additional information as needed.

Feeling taxed? We’re here to help.

If you find yourself dealing with increasingly complex tax issues as the years go by, it may be time to call in for back up. 

The more complicated your returns get, the more likely you are to either fill something out incorrectly or submit documents that flag your returns for review. Hiring an accountant can save you a ton of time and stress—plus, they can help reduce your tax bill using their expertise.

If it’s time to get some tax help, let us know. Contact us anytime.

This post has been prepared for general information purposes. It is not advice. The information presented may not fit your unique situation, please consult one of our trusted business advisors at RHN CPA for further clarification and interpretation of your circumstances.