After you have filed your return, the CRA will send you a Notice of Assessment along with your refund cheque or statement of balance owing.
The Notice of Assessment explains whether the CRA made any changes to the way you filed your return and advises you of any additional tax liability. It also contains information essential to the filing of next year's return, such as your RRSP deduction limit, your required payment if you participated in the Home Buyers' Plan, and any tuition and education carry forward amounts you still have available.
Normally, that's the end of it. However, the CRA does conduct post-assessment reviews (and, more rarely, pre-assessment reviews) to ensure compliance with the Income Tax Act.
Post-Assessment Reviews
The most common reason for post-assessment review is to confirm that you are in fact eligible for one or more of the deductions or tax credits you claimed on you tax return. For example, if you filed your return electronically and made a claim for medical expenses or charitable donations, the CRA may request to see your receipts to ensure that you claimed the right amount. One advantage of having your return filed by H&R Block is that since we keep this information on file, you can forward us the request you received from the CRA and we will take care of answering the government for you. You will usually never need to worry about it.
Don't take it personally if your return is selected for review - returns are usually chosen by random selection. However, your return may also have been chosen because the figures reported on it do not match those provided by other sources. For example, the amount you reported as employment income may not match the amount provided by your employer on your T4. You may also be more likely to be reviewed if you were subject to review in a previous year and your return was adjusted as a result.
The fact that your return was filed electronically does not mean that you are more likely to be reviewed. The selection process is the same for paper-filed and electronically filed returns.
Reviews and Adjustments
In our experience, the vast majority of reviews do no result in adjustments. However, if you made an error or you are not eligible for one of the tax deductions you claimed, the CRA will issue a Notice of Reassessment explaining the adjustment and advising you of the additional amount owing. Interest on the additional amount will also be charged from the deadline date for the taxation year in question.
One of the advantages of having your return prepared by H&R Block is that we will pay any interest or penalties on a reassessment that results from a mistake on our part.
Normal Reassessment Period
Typically, the CRA may only reassess a return within three years of the mailing date on the original Notice of Assessment. However, the three-year period is extended to six years in cases where an amount may be carried back to a prior-year return. This three-year or six-year limitation, which is referred to as the "normal reassessment period", does not apply if you made any misrepresentation attributable to neglect, carelessness, or willful default in the filing of your return. In these circumstances, the CRA may go back as far as it wants.
Is the CRA always right?
The CRA reviews a large volume of returns each year, so it is not surprising that the occasional reassessment is issued in error. Usually this is the result of a misunderstanding that can be cleared up over the phone.
However, there are situations where a reassessment can result in a legitimate disagreement between the taxpayer and the CRA, either as to the factual situation giving rise to the reassessment or the correct interpretation of the Income Tax Act. In this situation, you can file a Notice of Objection outlining the reasons you disagree with the assessment. Your Notice of Objection is reviewed by an appeals officer who has the power to vacate or vary the reassessment.
Another advantage of having your return prepared by H&R Block is that we will prepare a Notice of Objection for you if we believe that you were wrongly reassessed.
