Adjusting Tax Returns: Control the Amount of Tax You Pay

It’s officially post tax season.  As of June 17, CRA had received 30,908,149 tax returns and the average tax refund was $2200; the average taxes due were $7400.  Now is the time to pay up, invest tax refunds wisely and adjust errors and omissions that may have occurred in your filings.  But as important - get ready for the annual tax audit season.  CRA can and will reassess tax returns for a variety of reasons.  Follow this post tax season tip sheet to manage the tax erosion CRA changes can bring:

Correct Errors and Omissions.  If you discover you have overpaid your taxes, by missing an important tax deduction or credit, you can request adjustments to prior filed federal T1 returns for most provisions within 10 years after the end of the taxation year being adjusted. Adjust your tax return by following these instructions:

• Do it Yourself.  Complete from  form T1-ADJ, available on the CRA’s website, or most preferred by the CRA,  make an electronic adjustment on the CRA website. Log on to “My account” and choose the “Change my return” option. Have supporting documentation available to justify your request. Be aware that CRA will guide you through a process in which specific line numbers on the T1 return need to be addressed.  For these reasons it is important to wait until a Notice of Assessment is received before a return is amended. This is difficult for most laypeople. 
• Mind Appeals Deadlines.  Some provisions on the tax return have a 90 day adjustment limitation.  In order to preserve your appeal rights you will want to be sure you don’t miss these deadlines.   
• Call your tax professional.  This is recommended in most cases.  Let your tax specialist know about any communications from the CRA (be sure to check your email for electronic communications) and they will file a proper adjustment request for you or provide advice as to whether a Notice of Objection needs to be filed and what the timelines are.
• Never file a second tax return.
• CRA can file a return for you.   If you are a chronic late filer you’ll want to know about subsection 152(7) of the Income Tax Act.  Essentially the Minister is not bound by the tax return you file; they can file a return for you in certain circumstances reflecting their view of your personal tax situation.   In this case, the penalties for false statements or omissions do not apply as the Minister would not be able to prove that you knowingly or otherwise, made a false statement or omission in a return.
• Understand the penalty provisions.  There are penalties for not filing a specific return, late filing,  missing slips, gross negligence and tax evasion.  Take the time to discuss this with a tax professional and save yourself a significant erosion of time and money by getting your taxes in order. 

Note according to the CRA, you cannot use Change My Return function to change:

• a tax return that has not been assessed
• a tax return where 9 reassessments exist for a particular tax year
• a bankruptcy return
• a return prior to the year of bankruptcy
• certain returns for international or non-resident clients, including returns for sojourners, returns filed under section 116, 216, or 217, or an Old Age Security Return of Income (OASRI)
• a return where you have income from a business with a permanent establishment outside your province or territory of residence (you have to complete Form T2203, Provincial and Territorial Taxes for Multiple Jurisdictions)
• a return that was filed by the CRA under subsection 152(7).  This subsection provides authority to the minister to assess any income tax payable if the taxpayer has not filed.

In addition, CRA notes you cannot request the following:

• personal information relating to another person
• information from a third party obtained on the expectation that the information would remain confidential
• information subject to solicitor/client privilege
• confidential information obtained from other federal departments, provincial or municipal governments, and treaty partners
• information about CRA’s audit techniques, limits, tolerances, and specific tests, the disclosure of which would prejudice the results or future use
• independent review reports on appraisals or valuations
• referrals to and responses from other CRA branches
• documentation related to ongoing or planned investigations
• any other reports or documents prepared by the CRA prior to the disposition of a notice of objection before the objection has been resolved
• any other document that could prejudice the CRA's position
• computer access codes

It’s Your Money. Your Life.  File a tax return each year on time to recover tax refunds and preserve wealth. You can even recover “gold” from prior years by adjusting previously filed returns under the Taxpayer Relief Provisions. Many taxpayers miss claiming all the deductions and credits to which they are entitled. Be sure you’re not one of them and if you are , get professional help to ensure you don’t miss important appeals deadlines.