Got a tax review notice from the CRA? Experts say it’s common and manageable. Learn what triggers a review and how to respond with confidence.
Don’t Panic If the CRA Flags Your Tax Return—Here’s What to Do
Discovering that your tax return is under review can feel like the financial equivalent of a fire alarm. Your heart races, you start second-guessing every line item, and panic sets in—especially if you’ve already mentally spent that refund.
But before you hit full-blown stress mode, tax experts say there’s no need to panic. A tax review by the Canada Revenue Agency (CRA) isn’t the same as an audit—and in most cases, it’s a routine check, not a red flag of wrongdoing.
Let’s break down what a tax review is, why it happens, and most importantly, how you can handle it with confidence and calm.
Why Is Your Return Being Reviewed?
According to the CRA, around three million Canadians receive tax review letters every year. These reviews are usually triggered not by suspicion but by routine checks or specific claim types.
“A lot of these reviews are automatically generated,” explains Sean Grant-Young, National Tax Director at Baker Tilly Canada. “It could be just bad luck or something slightly unusual on your return.”
Common red flags that might trigger a CRA review include:
- First-time or large claims for medical expenses
- Moving costs
- Large interest deductions
- Unusual income patterns (especially for self-employed or gig economy workers)
Some reviews are purely random, while others may be due to inconsistencies in the data provided.
“Taxpayers with a history of filing errors or frequent adjustments are also more likely to be flagged,” notes Charles Drouin, a CRA spokesperson.
Review vs. Audit: What’s the Difference?
A CRA review is not the same as a tax audit. While a review involves a request for additional information to verify your claims, an audit is a deeper and more comprehensive investigation into your entire financial picture.
In other words, a review is more like a double-check, not a deep dive.
“Generally, if your claims are legitimate and your paperwork is in order, there’s nothing to worry about,” says Grant-Young.
What to Do If You Receive a Review Notice
If you receive that dreaded envelope or email, don’t toss it aside or ignore it. Here’s a step-by-step guide on how to respond appropriately and avoid any negative outcomes.
1. Read the Letter Carefully
The CRA’s review notice will clearly state what information or documents they need. It might request supporting receipts for medical expenses or proof of moving costs. Understanding exactly what’s being asked is the first crucial step.
2. Gather Supporting Documents
Once you know what’s required, collect all relevant documentation. This may include:
- Receipts and bills
- T4 or T5 slips
- Donation receipts
- Bank statements
- Lease agreements (for moving expenses)
“Be thorough,” says Grant-Young. “Gather everything that directly supports the claim in question.”
Pro Tip: Organize Your Submission Like a Pro
Rather than sending the CRA a messy stack of documents, take the time to make your submission organized and easy to interpret. This can help your review process move more quickly and smoothly.
Here’s how:
- Include a summary page outlining what’s in the package.
- Highlight or circle important numbers or dates.
- Label each document clearly (e.g., “Medical Receipt – January 2024”).
If your submission runs 20 pages long, make sure the first page acts like a table of contents. Don’t give the CRA any reason to miss or misinterpret something.
Timing Matters: Don’t Miss the Deadline
The CRA generally gives you 30 days to respond to a review notice. If that timeline is too tight, you can call to request an extension—but do it before the deadline.
Missing the deadline can lead to your return being reassessed without your input, which could result in losing deductions or being forced to repay part of your refund.
“Timeliness is just as important as accuracy,” Grant-Young warns.
What Happens If You Don’t Comply?
Ignoring the review letter—or failing to provide proper documentation—can have real financial consequences. If the CRA can’t verify your claims, they’re within their rights to deny the deduction, leading to:
- A reduction or loss of your tax refund
- A higher tax bill
- Interest charges on amounts owed
“If you can’t support that deduction, CRA doesn’t have to grant it,” says Grant-Young.
How to Minimize the Risk of a Review in Future
While there’s no surefire way to avoid a CRA review, you can reduce the likelihood by following best practices when filing:
Ensure accuracy
Double-check all numbers and make sure they match your T4s, T5s, and other slips exactly.
Stay organized
Keep all relevant receipts and documents in one place throughout the year—digitally or physically.
Don’t exaggerate claims
Only claim what you’re eligible for, and make sure deductions are well-supported.
File on time
Late filings can increase your chances of a review, particularly if you’ve had previous issues.
“It’s really about being accurate, organized, and honest,” says Drouin.
Special Considerations for Gig and Self-Employed Workers
Freelancers, gig workers, and small business owners are under increased scrutiny because of the complexity and variability of their income and deductions.
If you fall into this category:
- Be extra diligent in keeping records of income and expenses
- Use tax software that tracks your deductions automatically
- Consider consulting a tax professional for review before filing
What If You Made a Mistake?
If you realize you’ve made an error after receiving a CRA review notice, don’t try to cover it up. Transparency can go a long way in your favor.
“Submit a correction and include a note explaining the oversight,” suggests Grant-Young. “It’s better than ignoring the issue.”
The CRA may be lenient if you show that the mistake was unintentional and you’re making a good-faith effort to resolve it.
When to Get Professional Help
Most simple reviews can be handled by individuals, but if:
- You’ve received multiple review letters
- You don’t understand what’s being asked
- You’re unsure how to compile the documentation
… then it may be wise to contact a tax professional or accountant.
“Even one consultation could prevent a costly reassessment,” says Grant-Young.
Conclusion: Be Prepared, Not Panicked
A tax review letter from the CRA might feel intimidating, but it’s far more routine than it is threatening. Most reviews are simply checks to ensure tax credits and deductions are properly claimed and supported.
If you respond in a timely, thorough, and organized manner, your review will likely conclude without incident.
Remember: the CRA isn’t out to get you—it’s just trying to keep the system honest and fair for everyone. Stay calm, be accurate, and follow the process.
