It is Reassess First, Ask Questions Later Era at CRA

There is a trend taking place in the last twelve months.  The number of CRA reviews that I am dealing with have increased noticeably.  Many of these reviews are not for an earth shattering amount of GST or income taxes being reviewed.  They are what I would call random audits to see if the taxpayers randomly chosen are being honest and then extrapolate from there.

Lack Of Experienced CRA Reviews Are Costing Taxpayers Money

What I am noticing is the initial CRA contact person who examines the documents provided either lacks in-depth tax experience or is given no authority to exercise judgment.  A discrepancy of a small amount between filing and the general ledger is getting escalated to a full review status.  Even when explanations are being provided, the contact person either does not understand accounting or lacks the authority to end the review process.  This new method of using low level staff at the start of the review process is costing taxpayers money because professional advisors are needed to respond to the CRA requests and questions.  After the initial review was escalated to full review or audit status with qualified accountants on both sides working together, the review ended with no adjustment to the initial filing.

Another trend I am noticing is reassessment with little input from the taxpayer.  Again, the reassessed amount was for an additional $ 2500 in GST from CRA, not an earth shattering amount.  When the taxpayer’s accountant asked for proof of how this additional amount was calculated, no further correspondence other than a reversal of the reassessed amount was forwarded.

My final example is with a taxpayer who did misinterpret the GST rules on whether to charge GST at 5% or 0% to non-residents.  The auditor applied the GST rules correctly for the most part.  However, GST was mistakenly applied on exempt sales by the auditor.  In addition, the calculation of GST owing was applied incorrectly throughout the file.

Auditors do have a big work load and their job is not easy.

My Take On CRA’s New Policy

My point here is this:  CRA’s new policy is to put the taxpayer on the defense from the start.  CRA is also issuing reassessments with little or no support on how the amount came about, leaving it to the taxpayer to fight back.  These practices are more costly to the less affluent because these are the taxpayers who are often without professional representation.