You check the mail, see the Canada Revenue Agency’s name on an envelope, and your coffee goes cold. Fair enough. More often than not, though, what’s inside is dull: a routine request, a computer-generated notice, a reminder. Lots of these get closed with one tidy reply. Work out what kind of CRA letter your small business has actually received and how long you’ve got, and the dread usually drains away.
Here are the ones that land on small business desks most often, and what to do about each.
First, Make Sure It’s Real
CRA impersonation scams are everywhere. Before you answer anything, make sure the letter is genuine:
- Log in to My Business Account and see whether the same letter is sitting there.
- Gift cards, crypto, a wire to some individual’s account? That’s a scam. The CRA doesn’t take money that way.
- Don’t call a number that appears only in a dodgy-looking message. Use the official numbers on canada.ca.
Notice of Assessment or Reassessment
This is the CRA telling you what it calculated after processing your return, or after changing it. Every T2, T1 and HST return gets one in some form.
Grab the return you filed and go through both documents side by side. Same numbers? Put the notice in the file. Different numbers? Figure out what changed and why. Disagree with a reassessment? The clock is generally 90 days from the date printed on the notice to object. People lose that right simply by mulling it over too long.
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Request for Information or Documents
Here the CRA wants proof for particular items on a return: receipts behind an expense, the invoices supporting your input tax credits, or the background to a specific transaction. Most of the time it’s a review, which is much narrower than an audit.
There’ll be a deadline, often about 30 days. Answer exactly the items listed, with each document labelled, and don’t bury the reviewer in paper. Running short on time? Ask for more before the date passes. Requests that go unanswered tend to end with the item being disallowed.
GST/HST Review Letters
A reviewer is going through your HST return, and the focus is usually input tax credits or an unusually large refund.
Dig out the supplier invoices. The reviewer will want to see each supplier’s GST/HST number on them, plus the tax charged. Tidy files make these reviews quick. Invoices missing those details slow everything down, so it pays to look them over when they first come in.
Payroll Review Letters
Two questions tend to come up. Do the T4s match what you actually remitted? And were some of your workers really employees who should have had CPP and EI deducted?
Put the T4 summary next to your remittance history. Explain any gap in writing. Amend slips if they’re wrong. Employee-versus-contractor questions deserve extra care. However that gets decided, it affects what you owed in past years and what you’ll owe from now on.
Instalment Reminders
The CRA is suggesting how much to pay in instalments, based on your past tax. Nobody is billing you.
You can follow those suggested amounts or work out your own from what you expect to earn. There’s a useful protection in following them: pay the reminder amounts on time and you generally won’t be charged instalment interest, even if your tax for the year ends up higher.
Demand to File
Formal and serious. The CRA believes a return is missing and wants it.
Either file by the date in the letter or explain, promptly, why you don’t have to. Ignoring a demand can lead to heavier penalties, and in some cases to prosecution.
Audit Notification
Sometimes it’s a phone call, sometimes a letter. Either way you’ll hear that an audit is beginning, usually with the years and topics in scope.
Ask for the scope in writing. Pull the records for just those periods. Many owners authorize a representative so the auditor deals with a professional rather than with them. Be accurate, provide what’s requested, and log everything you hand over. Getting selected isn’t an accusation, by the way. Some files come up through risk scoring, others because the CRA is looking at a whole industry.
Collections Letters and Requirements to Pay
These deal with overdue balances. The serious one is a Requirement to Pay, sent to your bank or your customers, which tells them to pay money they owe you directly to the CRA instead.
Don’t wait on this one. Call the CRA that day. Arrangements to pay over time are often possible, and the sooner you call, the less damage to cash flow and to customers who’ve just been told to pay the government instead of you.
Five Habits That Make Every Letter Easier
- CRA mail is opened the day it comes, with the reply date written big on the first page.
- Switch to online mail. Moving offices won’t lose you a letter.
- Records live in folders by year and tax type for six years or more.
- Your accountant is set up as your representative and can see what the CRA sees.
- Copies of everything sent, with the date and how it went.
When to Get Help
A straightforward request for a receipt or two? You can probably deal with it. Bring in a professional when there’s serious money involved, a dispute over whether someone was an employee or a contractor, several years under review, or a full audit. That first letter back to the CRA tends to frame the whole review.
Conclusion
Most of what the CRA sends is routine. The tougher letters still go better with a fast, complete answer. So: make sure it’s real, figure out what it is, note when the reply’s due, send what they asked for and keep copies. If a lot of money is at stake or the deadline’s close, call for help at the beginning. Halfway through is harder.
Frequently Asked Questions
How long do I have to respond to a CRA letter?
It’s printed in the letter, usually about 30 days. Objections to reassessments generally have to be filed within 90 days.
Does a CRA review mean I’m being audited?
No. A lot of reviews just want support for one or two items and wrap up once you send it.
Can my accountant deal with the CRA for me?
Yes, once you’ve authorized them as your representative through the CRA’s online system.
What happens if I ignore a CRA letter?
Claims may be disallowed, penalties can grow and, with a demand to file, more serious enforcement may follow.
About the Author
Abid Manzoor of Webtaxonline is Managing Partner at the firm and a senior tax advisor. He works with business owners and individuals on corporate and personal tax, cross-border issues and tax planning.