When it comes to dealing with the Canada Revenue Agency (CRA), taxpayers often find themselves navigating through a maze of complex terminology. Two commonly misunderstood terms are “review” and “audit.”
A CRA review is an assessment carried out by the agency to verify the accuracy and completeness of the information provided on a taxpayer’s tax return. It is a routine procedure that aims to ensure compliance with tax laws. During a review, the CRA may request additional documentation or clarification on specific items. This process is typically less formal and less extensive compared to an audit, often conducted through correspondence or a brief meeting with the taxpayer or their representative. Although reviews may result in changes to the tax return, they are generally less intrusive and time-consuming than audits.
A CRA audit is a more in-depth examination of a taxpayer’s financial records and transactions. Unlike a review, an audit is typically triggered when the CRA suspects significant errors or deliberate non-compliance. Audits are conducted to determine the accuracy and legitimacy of a taxpayer’s reported income and deductions. They involve a thorough inspection of financial records, including bank statements, receipts, invoices, and supporting documentation. Audits can be conducted on-site at the taxpayer’s place of business or residency and often involve face-to-face meetings with CRA auditors.
Understanding these differences can help taxpayers be prepared, respond effectively, and ensure compliance when dealing with the CRA.
IFC’s tax packages include assistance with CRA reviews and audits. Talk to us to learn more about our tax preparation packages.