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 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.

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/review-your-tax-return-cra/types-reviews.html

Artists and Arts Grants

We know 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.