The taxman cometh

Posted: January 7, 2010 in General Information, Mortgages, Sellers
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(NC)—A research study conducted by Sage Research Corporation for Canada Revenue Agency (CRA) showed taxpayers believe Netfile makes it easier to file a false or altered claim compared to other means of filing.

“Canada Revenue Agency encourages Canadians to file online through their Netfile system but this study showed some interesting results,” says Cleo Hamel from the Tax Advisory at H&R Block ( “It seems Canadians think they can be less honest on Netfile.”

Returns using Netfile are subject to the same scrutiny as returns filed on paper. The CRA will still review the returns and request further information or documentation when needed.

“There are certain credits or deductions that can trigger a request for more information or details,” explains Hamel. “For example, moving expenses are one of the most commonly reviewed, and the CRA can make adjustments if they feel you claimed too much. These requests can come a few months after you have received your refund, so you need to keep your paperwork.”

For taxpayers suspected of making false claims on their tax return, it could trigger an audit. An audit can review tax returns dating back three years and could result in fines and taxes owing if you have not been entirely truthful on a tax return.

“Being completely honest on your tax return is the best policy, because ultimately, it will make your life easier,” says Hamel. “Employers have to register T4 slips with the government, so if you fail to include some of your income, the CRA will find out.”

If you are audited, it is important to have the appropriate paperwork for the CRA agent. Make sure your records are up to date. Some tax professionals will accompany their clients to an audit to explain how the return is prepared. It is not a legal representation, but it can help with the process.

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