We’ve talked elsewhere about CRA Matching, the process by which CRA takes a closer look at a tax return and the slips on file for a taxpayer to look for errors.
Usually, CRA is very good at this. After all, looking at documents and numbers is their stock in trade. In our experience they’re almost always right. But now and then even the Canada Revenue Agency (CRA) can make an error.
How It’s Supposed To Work
CRA matches a tax slip by looking at the return where the slip is supposed to go, and seeing if it’s there. But sometimes there’s more than one correct place to report a slip. So CRA can think a slip is ‘missing’ (and therefore the tax hasn’t been applied) when in fact it’s been reported elsewhere in the return and taxed appropriately.
An example of this is when a taxpayer who is self-employed has some freelance income shown on a T4A slip. For a self-employed person, this income can (and usually should) be reported as part of business gross or professional gross on the self-employment part of the tax return. With the T4A income reported this way, the appropriate amount of tax has been assessed. There is no error or omission in the return.
Why You Should Never Report Your Grant On Line 13000 (regardless of what the guides say)
But for people who are not regularly self-employed – which is the majority – a T4A slip is reported as ‘Other Income’ on Line 13000 (known as line 130 on 2018 and earlier returns), and that’s where CRA tends to look for it. On the self-employed taxpayer’s return, CRA Matching sees the empty Line 13000, believes the slip/income was never reported, adds it to the taxpayer’s income, and sends the taxpayer a reassessment and a tax bill.
It’s therefore important, when you receive a notice of reassessment, to read the paragraph in the Notice of Reassessment where CRA explains why they’ve made the changes and make sure it makes sense. If they’re wrong, you can notify CRA and they’ll usually work with you to correct the error.
How To Fix a CRA 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.
If you think CRA has made an error and you’d like us to look into it, contact us today.