Little-known fact: 80% of Canadian income tax filing works on the honour system.

During tax season, CRA receives an avalanche of income tax returns; far more than they could ever review in real time. Consequently, they send out most Notices of Assessment having done little-to-no review of what is actually in those tax returns. Unless your return has been selected for a pre-assessment review, for the most part CRA just goes along with whatever has been filed and assumes it’s correct. That’s right: most returns are just accepted, sight unseen.

At least, at first.

Later, when the frenzy of tax season has subsided, CRA takes a closer look at what’s been filed, a process which includes ‘Matching.’

Matching: CRA Takes a Closer Look

CRA has copies of every tax slip that has been issued to you from any source (your employer, your bank, your investments, etc.). Matching is the process by which CRA looks at the slips they have on file for you and checks to see that all of them have been included in the return and entered correctly.

If they believe they’ve found an error or omission, they usually re-assess the return with the correction in place, and the majority of the time this change triggers an increase in tax liability. In that case, the taxpayer receives a Notice of Re-Assessment and a request to pay the extra amount of tax. Alternatively if they’re not sure it’s an error, CRA Matching may send you a letter to ask about it.

Listen When CRA Asks for More Info

Responding By The Deadline in the Matching Letter

A CRA Matching letter usually includes a deadline by which they request a response. The deadline just indicates how long CRA will wait to hear from you before just making an assumption of their own and issuing a Notice of Reassessment based on their ‘correction.’ Usually that assumption isn’t the best outcome for you, so it’s generally advisable to respond in the time given.

Does CRA Matching ever make mistakes? Definitely!

This deadline is not your last chance to respond to or correct a misunderstanding. If you’ve missed the deadline in the letter, you can still re-open the case up to ten years later to ask for a change to your income tax return.

Have you failed to respond to a Matching letter in time? Personal Tax Advisors can help!

When CRA Matching Makes a Mistake

However it is also possible for CRA to make an error, and charge tax that the taxpayer actually doesn’t owe. Has this happened to you? learn more here.

Request for Adjustment: How To Change Your Return If You — Or CRA — Make An Error

If you have reviewed your Notice of Reassessment and believe CRA to have made an error, you must send CRA a Request for Adjustment, which is their fancy term for requesting a change to a return. You can make changes to a return up to ten years after the tax year to which it pertains. For example, you have until 2032 to make changes to your 2022 income tax return.

A request for adjustment can be done in writing by sending a letter and/or a completed T1-ADJ T1 Adjustment Request to your tax office, or by using Change My Return on in your CRA My Account to make the requested change online. CRA will review your request and respond in writing as to whether they have accepted your change or not.

If you think CRA has made an error and you’d like us to look into it, contact us today.