Taxman Sent you a request? Don't panic, It's not an Audit :CCRA SOTW
Alan Baggett
Taxman sent you a request? Don't panic, it's not an audit
Ray Turchansky, CanWest News Service
Published: Friday, September 21, 2007
In recent weeks taxpayers have been swamped by requests from Canada
Revenue Agency to send in original information slips and expense
receipts to verify claims made on their 2006 tax returns.
Although Canada Revenue denies that the volume of requests is
increasing as a result of the growing use of electronic filing, under
which receipts are not provided, never have I heard of so many people
being questioned, many for the first time.
People are being asked for T2202A slips showing education and tuition
amounts, medical expense receipts, registered retirement savings plan
contribution slips, meal receipts and even travel logs for automobile
claims.
Do not panic. It is not an audit, merely a verification process.
Make copies of the requested receipts or information slips just in
case anything gets lost in the mail, send the originals to the tax
department within 30 days, and they will be stamped and returned to
you. If the amounts are being claimed correctly, and if totals add up
to what you claimed, there usually is no adjustment to your refund or
amount owing.
Canada Revenue goes through three preliminary reviews. The pre-
assessment review program, which takes place between February and
July, looks at deductions and credits before the notice of assessment
is issued.
The processing review program, normally between June and November,
occurs after the notice of assessment is sent out and asks for various
information slips.
The matching program, between October and the following March, cross-
references information from T4 employment slips plus T3 and T5
investment slips reported by the taxpayer, with T-slip summaries
submitted by employers and financial institutions. It also corrects
RRSP deduction limits, spousal claims such as child-care expenses, and
net income -- which determines the Canada Child Tax Benefit, the GST
credit and Guaranteed Income Supplement.
Some income tax returns are chosen for review at random, particularly
among people with union dues, child care expenses, moving expenses,
support payments, dependent claims, tuition fees or medical expenses.
Others are selected because of a major change in a person's tax
return, such as claiming education or disability credits for the first
time, or an abnormal increase in RRSP contributions.
If those steps don't settle the matter, the fourth stage of CRA
investigation is the full-scale audit, when a representative meets
with you face to face. After that, it's tax court.
Here are some tips.
- Don't leave receipts lying around; many cash register receipts fade
in sunlight after a while.
- If you can claim meal expenses, write the name of the person
entertained and the purpose of the meeting on the receipt.
- Don't submit bills or invoices. You must send in receipts or
cancelled cheques showing actual amounts paid, for which you were not
reimbursed by an insurance company or employer.
- Understand what expenses may be claimed and how -- some expenses
have to be depreciated over time rather than deducted all at once.
Also, make sure you inform the tax department if you move. If they
mail a request to an old address and you don't respond, you could be
denied credits or deductions.
© The Vancouver Sun 2007
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Canuck57
First, sounds like the government lost some data in their computers. Would
not surprise me. Except for meal receipts of little stuff, most like RRSP
contributions are pretty easy to verify electronically if you have the data.
But between Alan's other post on reasons for not filing and this one, it
does highlight a need for taxation reform. The system needs a
simplification to a point where the average person actually understands how
it works.
For example, EI and CPP deductions have maximum amounts. Essentially a low
end tax that compensates for the lower rates on lower incomes, yielding
about the same net tax rate as someone making much more in the ultra high
aggressive tax rates.
Then you have RRSPs, you can contribute, but Pension Adjustments take it
away. Like I gave you something and took it away.
Finally, a written report on how it was spent last year. Ya, I know you can
get it in the internet, but many either don't care or don't have the time.
Break it down too. 6% Health Care, 5% Indian Affairs direct, 5% Quebec
Transfers, 10% for CPP, 40% corporate grants, 10% welfare etc.
"Alan Baggett" <canada.rev...@hotmail.com> wrote in message
news:f597bed1-527c-46f2...@m71g2000hse.googlegroups.com...