As readers of my blog are aware, I answer almost all the questions I am asked. I attempt to answer the less complicated questions (although they are often couched in case I was not with provided all the facts) and I provide guidance in response to other questions. Unfortunately, I am not able to provide answers in the areas of corporate or personal income tax planning, because of (a) time constraints (b) without knowing all the facts and circumstances; I cannot attempt to properly answer a question with these limitations.
I however, do greatly appreciate my reader's comments, as they provide tangible evidence I have engaged them. A bonus for me is that the questions actually provide me with ideas and topics for future blog posts. The comments provide feedback on which posts have wide appeal or are at least controversial topics. For example: my post on Is Your Corporation a Personal Service Business? has 76 comments, my post on The Income Tax Implications of Purchasing a Rental Property has 65 comments and my post on CRA Audit – Will I Be Selected? has 50 comments. For certain other posts, like Is it Morbid or Realistic to Plan for an Inheritance, I just enjoy reading the comments I receive.
Anyways, back to the matter at hand. With E-filing, there are few hard documents the CRA requires to be filed initially. That is not to say the CRA will not follow up with an information request for copies of actual receipts to evidence expenses claimed such as child care and credits such as donations. For those that still paper file (starting in 2012, all accounting firms must now EFILE all returns), the receipts you submit essentially include any T-slips, RRSP contribution receipts, medical receipts and donations.
That is all you should provide the CRA. If you have back up support for stock transactions, real estate transactions, interest expense or what have you, you should not provide these documents to the CRA unless you are requested to do so. In many cases, even if the item is contentious, the reality is that it will not necessarily be selected for an audit follow up. So why ever volunteer such information?
In addition, people for some inexplicable reason have an urgent need to explain their actions to the CRA. I have had several cases where a new client who has engaged me to assist in a tax matter proudly shows me the 3 page letter full of reasons and excuses they sent to the CRA.
I would suggest that in most cases, these letters are browsed through by the CRA. Where your letter is read in detail, I would submit the CRA representative is only looking for facts contained therein and they have little or no interest in your story and excuses (save your story for an actual auditor assigned to your case or a fairness application) unless you are providing them their dose of daily entertainment. What in fact you have done in many cases is provide the CRA an audit trail for an item probably not even on their radar.
My advice is simple. Do not ever provide anything voluntarily, be it a document or a mea culpa letter. If you have an issue or need to correct something, engage an accountant, who will know how to finesse the item without providing more than is required. Remember, less is always more with the CRA.
The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.