Tax return got flagged for a review? Don’t panic, experts say

Sean Grant-Young, national tax director at Baker Tilly Canada, as shown in this handout photo, says tax reviews aren't serious if a taxpayer has claimed legitimate costs. THE CANADIAN PRESS/HO-Baker Tilly Canada *MANDATORY CREDIT *

Finding out your tax return is under review — especially after you’ve already spent your expected refund — can be unnerving. But it’s far less serious and more common than you think, tax experts say.

The Canada Revenue Agency sends tax review letters to about three million taxpayers every year, according to its website, mostly to verify benefits and credits claimed on the return.

“A lot of these (reviews) are automatically generated just based on either luck or what’s on your tax return,” said Sean Grant-Young, national tax director at Baker Tilly Canada.

Mostly, he said, unusual claims like moving expenses, large interest deductions or any larger amounts claimed for the first time, such as medical expenses, could trigger a review notice.

While many tax returns are selected at random, Charles Drouin, a spokesperson for the CRA, said inconsistencies could also trigger a review.

Gig economy workers or those that are self-employed are more likely to misreport their taxes, he said in an email. Taxpayers with a history of errors or adjustments could also be flagged, Drouin said.

Regardless of the reason, getting a review letter from the taxman can stir anxiety.

“People get very concerned, and sometimes rightfully so, about getting mail or requests or anything else from the CRA,” Grant-Young said.

Generally, he said, reviews aren’t serious if a taxpayer has claimed legitimate costs, followed the procedures and has the numbers correct.

In most cases, the CRA is looking for more information to verify the tax credits and benefits claimed, such as medical bills or receipts from moving expenses. This is different from a tax audit, which is a comprehensive review of your financial records.

Drouin suggested reading the letter carefully and gathering all the necessary supporting documents such as receipts, income or T-slips, or other proof linked to the claims.

Grant-Young said it is also important to put all the information in an accessible package so there’s no room for misinterpretation.

For example, if the CRA has asked you to backup your medical expense claims, gather up all the bills and prepare a page that tallies the costs to match the amount claimed on the tax filing.

If your final submission to the CRA is 20 pages long, Grant-Young suggests putting a summary page on top so the agency can review and cross-reference the documents easily.

These bills and documents “are very much just file support (for the CRA) because we don’t send all the information anymore” when filing taxes online, Grant-Young said. “That’s just not how the CRA online system works anymore.”

While it’s often not serious, tax reviews shouldn’t be taken lightly.

Grant-Young said if a taxpayer doesn’t provide the supporting documents or fails to justify the deductions, the CRA will reassess the return which could result in owing money.

“It’s important to make sure everything is submitted correctly and supportable because at the end of the day, if you can’t support that deduction, CRA doesn’t have to grant it to you,” he said. That could either result in a higher tax bill or the taxpayer will have to repay some or all of their refund with interest.

Most importantly, make sure the documents are sent in on time, he said. “It’s really about making sure you don’t go outside their deadline.”

The CRA allows 30 days for submissions but people can call and ask for an extension if they need more time, Grant-Young said.

“These types of reviews will happen and it’s really CRA doing almost triage and making sure to keep everyone honest,” he said.

Drouin said there are ways to reduce the likelihood of a tax review — ensuring accuracy and double-checking that all figures match supporting documents like T4-slips or receipts, filing on time and keeping tax records organized, as well as claiming only eligible deductions and credits.

If the review notice lands in your mailbox despite these measures, Grant-Young said the only way to deal with it is to be “prudent in addressing it quickly and having proper support for the submission.”

This report by The Canadian Press was first published May 2, 2025.

Ritika Dubey, The Canadian Press