Tax season can be a stressful time of the year for many Canadians as they busily gather receipts and prepare their tax returns. But with a little pre-planning, organization and diligence they can access the many Canada Revenue Agency (CRA) resources available to them and avoid some of the pitfalls that could result in an audit.
"Most people probably are familiar with the many technical resources on the CRA web site - the ability to download forms and returns, read CRA guides on a variety of technical topics, and otherwise research tax questions," says Murray Pituley, director of tax and estate planning with Investors Group. "However, many people might not be familiar with a taxpayers' account service called My Account which lets them view information about their tax situation and manager their account.
My Account lets you do two things - see your account and then manage it.
It allows you to view your current information and then to review your returns for the last 10 years, and see the current state of your return in real time.
To manage your account it allows you to make changes to your current return and for two years back for such things as adding new information from receipts, correcting errors, and other housekeeping matters such as changes to your address, marital status and applying for child benefits.
You can register for the account in about five minutes or less by logging onto the CRA web site, entering your name, social insurance number, date of birth, and one line from your 2012 return. You answer some security questions, the CRA sends you an activation code in the mail in a few days and you're in business.
"The two functions are very powerful and the whole process is easy and quick," Pituley says. "You can get information on your return and things like your instalment payments before you get formal notification on paper in the mail. It's very useful."
Making full use of all available resources is important to help ensure you meet all requirements and deadlines and hopefully minimize the chance of being audited.
Taxpayers often are confused about audits.
"There are different types of audits but most communications from the CRA are not audits but verifications of forms or information," Pituley says. "The majority of contacts from CRA are not audits."
The majority audits are determined through the use of computer lists. The computer does comparisons of your current return to your past returns, your returns compared to the returns of taxpayers in your neighbourhood or in the same lines of work, and then identifies individuals of high risk.
In other cases, the CRA will specify an audit project focused on certain industries or businesses or claims such as service providers who receive tips, charities or non-profit organizations.
Another source of audits comes from leads from outside sources such as an ex-spouse, business competitors or from an employee who left a company on bad terms.
The CRA has a section about audits on its web site,
"The most important thing is to ensure that all your tax slips are received and reported because if you file without reporting everything the penalties can be high," Pituley says.
He suggests comparing your current return to your past returns and if there discrepancies know why and make sure you can defend them.
If you use tax preparation software, go into the program's diagnostics which will give you warnings about potential errors, inconsistencies and missed opportunities.
If your tax situation is complicated you might seek professional help.
"Be organized about it," Pituley recommends. "Start collecting your receipts early and keep them all together in a file so you can produce them if you have to. If you're audited and you're organized you're well on the road to having a successful outcome."
Talbot Boggs is aToronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors.
