CRA regularly conducts a number of review activities to ensure compliance with tax laws since Canada’s tax system is based on self-assessment. This means that individuals voluntarily complete their income tax returns to report their annual income and deductions or credits, ultimately leaving individuals to calculate the amount owing or the refund to be received.
Review programs are utilized by CRA in order to ensure the accuracy of income tax returns by identifying common areas of misunderstanding. It is important to note that if your income tax return is selected for review, it does not represent a tax audit. It is, however, the responsibility of the tax payer to justify and provide support for any amounts in question.
If you receive a review letter or communication from CRA that you have questions about, or require assistance with, please contact HGA.
For more information on the various types of reviews programs conducted by CRA, please visit https://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rvws/typs-eng.html
CRA has been increasingly promoting the Liaison Officer Initiative (LOI) which is intended to help small businesses meet their tax obligations. Through this initiative, selected businesses would receive in-person guidance and information to assist them to understand their tax responsibilities, help them identify potential errors so they can be corrected before filing, and help them better comply with their tax obligations. It is important to note that this initiative is a voluntary program and therefore taxpayers are not obligated to participate.
Participation may include:
- being asked to review the company’s books and records
- visits to a place of business
- being asked to sign a Compliance Support Arrangement (CSA)
CRA has made it clear the LOI is not part of the traditional audit program, but rather a complement to it. The initiative is intended to be proactive and help better support businesses, not investigate or hurt businesses, but how are taxpayers, in fact, being protected?
If you do choose to partake in this initiative, you may be asked to sign a CSA as referred to above. This document is a voluntary acknowledgment that you understand your tax obligations and responsibilities. Although CRA states that the CSA is not binding in a court of law, one should be hesitant to sign a CSA without careful review by a tax lawyer and fully understanding the possible repercussions.
If you receive a letter from CRA advising that your corporation has been selected to take part in this program and you are unsure how to proceed, please contract HGA for assistance.
For more information about the Liaison Officer Initiative, you can visit https://www.cra-arc.gc.ca/gncy/cmplnc/thrpntpln/lsnffcrnttv/loi-qa-eng.html#q1