Tax Pros Notice an Increase in CRA Audit Activity

CRA has been ramping up audit activity, according to 75% of tax professionals who said they’d noticed an increase when responding to our February poll. Here are the observations they shared:

“There are already many audit reviews and matching reviews from the CRA this year.  I don’t usually see them at the beginning of the tax year.  It seems that everything, including reviews, are delayed silly long and they will tell you it is due to COVID.  I have also noticed that if you are seeking an adjustment, that process is also delayed as the CRA will ask for something, we will provide it, then they will ask for something else they did not ask for originally.  It only seeks to delay the resolution.  They are targeting employee expenses quite a bit as well.” - Robert A Litschel

“Double to triple of 5 years ago for T1.  GST/HST audits up 100% from two years ago.  International FTC audits now one of two returns.” - Gerald Ian Campbell

“Yes, definitely an increase in audit activity in the last number of months and currently. They are after employment expenses, foreign tax credits, donations, medical and for multiple years at the same time. Also an increase in HST audits for small businesses for no obvious reason.  All of this just before tax season!” - William Samplonius

“Not only is there an increase, but they are taking forever to review the information when they get it. If they get it, that is, because I am seeing an ever-increasing number of occasions where the information is submitted in a timely manner and the result is an unfavourable re-assessment because ‘You did not supply the information requested.’    - Mitzi-Lynne Morgan

“Yes, and they’re all desk audits making things very difficult on larger files.  Received a desk audit this morning on 2019 corporate with 30 days to provide the information and ship invoices to them. Seems it’s always at tax season they want to do this...” – Alan Rowell

 “Greatly. We prepare all files to be review and audit ready always so it’s not a big deal. However, the knowledge of the CRA staff and the ability to process paperwork provided has greatly diminished over the years. We are seeing paperwork rejected stating xyz was missing (when it was not) or when adjustments are completed, they are completed incorrectly and we have to submit another request, sometimes 3rd time is a charm. It is quite concerning the training with CRA seems to have depleted over the years and they have turn more into credit collectors looking for any penny in a haystack they can find. I’m sure many people who do not have tax professionals representing them simply assume CRA is accurate when they tell someone they owe due to xyz, as the correspondence is often misleading or incorrect.  I truly believe CRA operations need a thorough operational review, because our tax dollars do not seem hard at work. They seem hard at being wasted nowadays.”  -Amanda Zais

“One client proof of income for 3 years with invoices. After reassessed all three years they requested proof of purchases for 2019 with all invoices from every company purchases were made from. Unbelievable amount of work sent almost a year ago. Still waiting for results.”  - Karen Kasian

 “I had information requested from 2013? How can you keep this much information?” – Susan Mackie

“Medical expenses are being questioned by CRA. They are a real pain.” – Robert Kelley

“Yes, I have clients been reviewed on the travel expenses.” - Maria Cheng

“Definitely increased audit activity. They like to ask for proof of foreign tax paid, so you can utilize the foreign tax credit. They want all your Canadian forms filled out in regard to it, cancelled IRS refund cheque, all your state income tax forms, etc.  In one interview, the IRS admitted they go after individuals more, because they can’t afford high priced lawyers that could tie them up in court for years. CRA seems to go after young people and seniors, the more financially vulnerable. I phone and ask for an extension, as their 30-day time limit from the date of their letter is never enough for the amount of information they are requesting. Also, send your response by registered mail, or a method with a tracker so you have proof of when they received it.” - Martin

“Definitely more reviews.  Once they get the requested info, they don’t do anything with it.  I am still waiting for info I sent in in August to be processed.  As of yesterday, Feb 9, nothing!  They say they have it, they say they are working on it, but they also say they cannot provide any info as to how long it will take.  And these are very simple things like proof of senior medical expenses, proof that children are living 50/50 with both parents.” - Pat Gamborg

“Yes. 1. Employment expenses 2. Foreign income validation of tax paid in the foreign country.”  - Sidney Schultz

“They seem to be targeting employment expenses this year.  Unfortunately, just as tax season is starting.  Also, multiple calls from T slip matching when the slip is missing on their files. Also, several clients postal codes mysteriously getting changed on Rev Can?” - Dennis Molyneaux

Thanks to everyone who participated in our February Poll. Please weigh in this month when we're asking: "Do you believe the RRSP is still a good investment for pre-retirees who work after age 60?"