Each year, the Canada Revenue Agency (CRA) conducts a review of many taxpayers' tax returns and benefits, focusing on finding any mistakes or oversights. According to Charles Drouin, a spokesperson for the agency, receiving a review request letter from the CRA should not be cause for concern. In fact, it’s part of the CRA’s strategy to avoid more serious audits. “We do everything we can to prevent audits,” Drouin explained in an interview with Yahoo Finance Canada. “We make efforts to educate people and simply ask for more information to confirm that things are correct.”

The CRA does not disclose the exact number of reviews conducted annually, as Drouin notes that revealing such information could compromise their strategies. However, an archived CRA webpage from 2019 indicated that approximately 350,000 letters are sent out each year.

What Are CRA Reviews?

The CRA reviews both tax returns and benefits claims. These reviews cover many of the over 100 benefits, credits, and deductions that a taxpayer may be eligible for, as eligibility can change from year to year based on life circumstances. Tax return reviews fall under seven categories:

1. Reviews conducted before a notice of assessment is issued
2. Reviews after a notice of assessment has been issued
3. Reviews of adjustment requests for tax returns
4. Examination of refunds
5. More detailed reviews of income, deductions, and losses
6. Cross-checking the taxpayer’s filing with records from employers or financial institutions
7. Special assessments aimed at detecting potential non-compliance trends

While many reviews occur during tax season, Drouin emphasized that these reviews are not limited to that time frame. The CRA has a dedicated division focused on non-compliance, which continuously analyzes data over time. For instance, they may review 2023 tax returns to assess overall compliance and, if they find widespread issues, trigger further reviews.

What Information Does the CRA Review?

The CRA looks for various errors in tax returns, especially those that could affect the accuracy of claims. For example, if they discover a common mistake made by many taxpayers in a previous year, they may review a wider range of returns to address the issue. While some reviews are random, most are triggered by what the CRA calls "impartial and non-discriminatory criteria." These reviews may be initiated if there is a change in a taxpayer's situation that affects their eligibility for certain benefits.