Anything happen after April 30 last year that sheds light on what may be sage advice for 2022 tax prep in terms of Canada Revenue Agency (CRA) attention?
In other words, what may be on CRA’s radar that likely will lead to CRA reviews? And are there any tips?
Well not much changed last year over prior years.
The typical CRA hot tickets for review, remained hot tickets for review, albeit with some shifting around of top priority items perhaps.
Your action plan for 2022 tax preparation should involve mindful reporting if any of the following occurred in your life in 2022.
A medical expense claim tops the review list, like every year.
This is such a wide ranging, all encompassing expensive personal cost, and perhaps emotionally draining memory.
The sheer volume of CRA rules are intimidating enough, and then add perennial changes, plus the need for ascertaining specific detail makes this claim more and more complex every year, all leading to major scrutiny by CRA.
Donation reviews remain in the top tier, likely due to fraudulent organizations claiming to be registered charities and issuing bogus tax receipts.
Also, the increase of on-line gifting to things like Go-Fund-Me pages which typically are not registered charities, but yet often are claimed as donations.
Then there is the simple fact that people make a legitimate claim but fail to retain the necessary donation slip to prove it to CRA, and CRA knows that taxpayers toss these slips but still make the claim.
Reviews for a claim for a dependant have been increasing in recent years, in particular a child as a dependant.
The typical scenario that prompts a review is the breakup of a couple with a child or two. Many scenarios play out.
For example, the recency of the breakup can be an issue because the first year of break-up has different rules than subsequent years. How many children are involved can play into it.
Paperwork is key to making this an eligible claim with proof of custody and child support responsibility topping the list.
Related to this situation are reviews surrounding spousal support as a deduction claim.
Again, legal documentation is key, including proof of payment of the support.
Union dues, likely because of the frequency of a duplicate claim because the dues are sometimes reported on a T4 and also on an official slip from the union, and then entered twice in error on the tax return.
Also, some dues that get claimed are not from eligible organizations.
Because governments worldwide are ferreting out tax dollars wherever possible and CRA is no exception, foreign income reporting and claims for the foreign tax credit has become a regular review item.
This can be quite a complex review, so keep all your support paperwork.
A few other claims that top out the frequently reviewed list include moving expenses, employment expenses and tuition deductions.
Without doubt, there are many other claims reviewed by CRA, but these are the typical ones that appear at the top of the list each year, some increasing in frequency.
There’s no trick to avoid a review.
The suggestion is to take tax prep seriously so if a review comes your way, what could be painful may likely just be annoying.
Be sure to respond within the 30 day limit or CRA will re-assess automatically.
It will take a T1 adjustment to change it back, assuming you are entitled to the claim.
If you used a professional tax preparer, perhaps they will offer you some guidance or may even handle the review, although not all firms do this free of charge.
Ron Clarke, owner of JBS Business Services in Trail, provides accounting and tax services.