What’s New for 2025 Tax Returns:
Updated January 2026
CRA Reviews
It’s natural – no one wants to receive a call or letter from CRA. However, in Canada we file taxes based on the honour system. The check and balance for this is random reviews by CRA. Occasionally reviews are not random – there are cases where CRA conducts special projects reviewing returns from specific regions and/or industries – but most reviews are random.
In cases where specific projects are in place, we pay special attention to these areas and will, of course, notify you of what it may mean in your case.
CRA reviews and matching letters
It’s an administrative procedure. There are several types of reviews. One of these involves CRA sending a matching letter when their system finds a discrepancy between what was filed on your return and the tax slips they have received for you – for example, from your employer.
Reviews and matching letters are handled by our office on your behalf. Most often, these letters are sent directly to our office. In cases where they are sent to our clients, we ask that the client contact us, providing the correspondence so we can deal with it. We do not advise calling CRA – call us instead!
The vast majority of reviews and matching letters are resolved with no changes. Reviews can be as simple as CRA requesting receipts for RRSP contributions, charitable donations, or medical expenses. Matching letters are often about T3 slips (investment slips) and/or T4a slips. Again, most are resolved with no changes to the tax return at all.
CRA has a web page that explains in detail the types of reviews and audits, should you wish to read more on this topic.
Foreign Tax Credit Claim reviews
We have noticed a distinct uptick in requests for additional proof and documentation on tax returns that make a claim for a foreign tax credit. This primarily affects people who file taxes in a foreign country and want to claim a reduction of Canadian tax based on the tax they pay abroad. There are many reasons someone might have to file abroad. For example, the USA requires its citizens and green card holders to file returns regardless of where they live in the world. This can also hit people who move to Canada in a year, where they are paying tax in 2 countries for the same year. Where Canada has a tax treaty with the country in question (as we do with many countries), it is possible to claim some relief for foreign taxes paid, the aim of which is to avoid double taxation. I will note, it does not entirely eliminate taxation, but it is a big help. It can be hard to keep up with what CRA will accept as proof of payment as there is no clear legislation on the matter and policies change. We encourage all clients who pay taxes to a foreign country, for any reason, to keep proof of everything, including copies of cheques or drafts paid, assessments or other proof of filing.
Artists and Arts Grants
We know from experience in recent years that virtually all grants received by artists will be reviewed. This is because arts grants are reported on the tax return as a net number – meaning after allowable expenses have been deducted. Thus, it appears as if not all income has been reported. It’s easy for us to respond to these requests from the T1 Matching department if we have the required materials. As this type of review has become ubiquitous, we will be asking all who received an arts grant to provide the grant letter and budget. The grant letter will indicate how much was awarded and for what project. The budget will list the expenses permitted under the grant. Note – amounts provided for subsistence are taxable to the receiver. Any amount of the grant kept for your own fee (perhaps as a writer, producer, visual artist, playwright etc.) will also be taxable.
