Now that I’ve filed, what’s next?

So you have filed your T1 personal tax return. What next?

So you have filed your T1 personal tax return.  What next?

Canada Revenue Agency (CRA) could conduct a pre-review.  That is, before assessing the return, clarification may be requested by CRA by asking for supporting documentation.  The pre-review is a targeted action by CRA and not a random audit of taxpayers.  CRA is being proactive so that the return is not assessed prematurely. These pre-reviews tend to be settled quickly.

If nothing triggers a need for a pre-review, the tax return is assessed by CRA, with minor adjustments possibly, and the Notice of Assessment forwarded to the tax payer.  If a refund is due, there will be a note stating the direct deposit or a cheque will be enclosed.  If taxes are due, a slip for payment will be attached.  If you have already paid that amount, you can likely ignore the request for payment.

The Notice of Assessment is an important document and should be retained for future reference.  It explains any adjustments to the return as it was filed.  It also indicates such things as RRSP limits, amounts outstanding on Home Buyers or Life Long Learning Programs, available room in your TFSA, available carry-forwards of deductions such as donations, education amounts, and business losses.   All in all, a valuable document to kick-start tax preparation next tax season. Don’t lose it.

Also included with the Notice of Assessment may be statement requesting installment payments.  To explain briefly, if you had income in the current tax year that was not subject to withholding taxes and as a result you now owe $3,000 or more in taxes as assessed in April, CRA politely tells you with this statement that you have to remit taxes quarterly throughout the upcoming year instead of assessing and paying next April.  Simply put, CRA wants the tax revenue sooner rather than later.

It’s best not to ignore the request to make installment payments except … EXCEPT … if you had an extraordinary year.  In other words, it was a one-off year of extra income that will not be repeated the following year and in fact, the current year will be back to normal in terms of income and taxes withheld.  If this is the case, the instalment requirement may not be applicable and a call to CRA to explain the situation is likely in order.

If for whatever reason you don’t remit the quarterly installments and you should have, penalties and interest will be charged effective the due date of each installment.  If you do remit the instalments and it is more than is necessary, CRA will refund the difference in April and likely will reduce the installment amounts for the following year.

Finally, CRA may conduct a review or audit after your return is assessed, for seven prior years as a matter of fact.  This is a topic all on its own.  Suffice it to say for the purpose of this discussion, you should respond promptly and cooperatively to any such request from CRA.

If you have prepared your own taxes, a visit with a tax consultant after you’ve had your first chat with CRA may be worthwhile.  And to be honest, this is when your earlier decision to have had your taxes prepared professionally could shine, assuming they have your back.  To this point, if you do have your taxes done by a professional, it’s fair to ask what their policy is regarding the handling of CRA requests, including fees for such support.

Ron Clarke has his MBA and is a business owner in Trail, providing accounting and tax services. Email him at ron.clarke@JBSbiz.ca. To read previous Tax Tips & Pits columns visit www.JBSbiz.net.

 

 

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