Receiving a letter from the Canada Revenue Agency (CRA) can be stressful, especially for corporate business owners in Calgary. Whether it’s a simple request for information or a full-blown audit, knowing why you received it and how to respond is crucial.
So, why did the CRA contact you? And what should you do next? Let’s break it down.
1. They Need More Information on Your Tax Return
If your business recently filed taxes, the CRA might request additional documents to verify your reported income, deductions, or expenses. This is usually a routine review, but it’s important to respond on time to avoid delays or penalties.
What to Do:
- Carefully review the letter and determine exactly what’s being requested.
- Gather and submit the required documents before the deadline.
- If you’re unsure how to respond, consult a tax professional to ensure accuracy.
2. You’re Being Audited
A CRA audit can happen for several reasons, including discrepancies in your tax return, industry risk factors, or random selection. Audits can be stressful, but preparation is key.
What to Do:
- Review your tax records and ensure all documents are in order.
- Do not ignore the letter—respond promptly and cooperate fully.
- Seek professional advice to navigate the audit process effectively.
3. Late or Missed Tax Payments
If your business has missed a tax deadline, the CRA will send a letter regarding overdue amounts. Ignoring this can lead to penalties, interest charges, or even legal action.
What to Do:
- Verify the outstanding amount and arrange for payment as soon as possible.
- Contact the CRA to discuss payment arrangements if needed.
- Avoid future issues by setting up automatic reminders for tax deadlines.
4. A Payroll or GST/HST Issue Has Been Flagged
Mistakes in payroll remittances or GST/HST filings can trigger a CRA letter. This might happen if you underpaid, overclaimed input tax credits, or miscalculated employer deductions.
What to Do:
- Review your payroll and sales tax records to identify any discrepancies.
- Correct any errors and submit the required adjustments.
- Stay compliant by keeping thorough financial records and using proper accounting software.
5. A Taxpayer Complaint or Tip Was Received
The CRA takes taxpayer complaints and whistleblower tips seriously. If someone reported potential tax fraud or discrepancies in your business filings, the CRA may investigate.
What to Do:
- Review your tax history to ensure compliance.
- Be transparent and provide all necessary documentation if required.
- If the allegations are incorrect, provide evidence to clear up any misunderstandings.
6. A Business Identification or Registration Issue
If there’s a problem with your business number (BN), GST/HST registration, or corporate filings, the CRA might send a letter requesting corrections or updates.
What to Do:
- Double-check your business registration details with the CRA.
- Correct any errors in your records and respond promptly.
- Ensure all necessary registrations are up to date.
7. A Refund or Benefit Adjustment
Sometimes, a CRA letter isn’t bad news! They might be informing you about a refund, benefit adjustment, or eligibility review for tax credits like the Canada Emergency Business Account (CEBA) or the Small Business Deduction.
What to Do:
- Review the letter carefully to understand the reason for the refund or adjustment.
- Confirm that your business qualifies for any credits or benefits.
- If something seems off, contact the CRA for clarification.
Key Takeaways
- Don’t panic—a CRA letter doesn’t always mean trouble, but it does require attention.
- Read the letter carefully to understand what’s being requested.
- Act quickly to meet deadlines and avoid penalties.
- Seek professional help if you’re unsure how to respond.
Got a CRA letter and need help? Contact us today—we’ll handle the details so you can focus on running your business.
