CRA clarifies policies on query timelines and access to audit documents

What are Canada Revenue Agency (CRA)’s guidelines for setting deadlines for audit query replies and providing access to audit documentation? These are just two issues for practitioners examined by the CRA-CPA Canada Compliance Committee.

As one of the seven committees set up under the CRA-CPA Canada Framework Agreement to formalize collaboration between Chartered Professional Accountants of Canada (CPA Canada) and the CRA, the joint Compliance Committee addresses issues related to improving the tax audit process. At recent meetings, CRA committee members provided important clarifications on how deadlines are set for responses to audit queries and how taxpayers and their advisors can gain access to audit documentation.

Timelines for responding to CRA audit queries

What is a reasonable amount of time for the CRA to expect a response to an audit query? For some practitioners, the deadlines set by auditors appear to be inconsistent. In some cases, deadlines may seem not to give enough time for a complete and accurate response.

CRA representatives clarified for the committee that income tax and GST/HST audits have different timelines, and these timelines can vary from five to 30 days depending on the taxpayer and the compliance program. For GST/HST credit claims, for example, 15 days are usually allowed for responses to CRA queries because documentation is simple and the CRA wants to get the refund to the taxpayer without delay. In audits of small and mid-sized enterprises (SMEs), however, a longer timeframe of 30 days is usually allowed to give resource-strapped SMEs time to gather and submit the right information.

According to the CRA, reasonable requests for an extension of time are normally granted.

Access to documentation from the CRA during the audit process

Some practitioners may be aware that, before issuing a penalty proposal, CRA auditors are required to prepare internal penalty reports setting out the basis for the penalty’s application.

What you might not know is that the CRA will provide these reports on request to taxpayers and their representatives after the penalty proposal has been made. Information in these reports can be valuable if the taxpayer decides to appeal the assessment. CPAs on the committee suggested that the CRA’s proposal letters could notify taxpayers directly about their ability to receive their penalty report on request.

As CPA committee members point out, it may be worthwhile for CRA auditors to share penalty reports with taxpayers and their advisors before the audit report is finalized. Doing so may allow the CRA, taxpayers and their advisors to engage in a dialogue and come to a consensus about the proposal, heading off any objection and appeal that might otherwise arise.

The CRA notes that during the audit process a taxpayer can ask for an update on the audit directly from the auditor. The Income Tax Act gives taxpayers access to their own information, including any actions or reports used by the CRA to assess them.

After a proposal letter is issued, a taxpayer can informally ask the auditor for information related to the audit activity, including:

  • reports prepared by an auditor to support an assessment
  • the auditor’s working papers
  • related correspondence with CRA headquarters (for example, technical interpretation requests or opinions)
  • scientific, appraisal and valuation reports

CRA headquarters advocates that auditors supply this information informally rather than compelling taxpayers to make a formal request for information under the Access to Information Act or the Privacy Act.

Keep the conversation going

I want to hear from you. What’s been your experience with the audit and assessment process? How might things be improved? Please post the details below.

CPA Canada’s Tax Blog is designed to create an exchange of ideas on tax policy and practice issues, and their impact on those who practise tax. Your comments can provide helpful input into the public interest advocacy positions developed by CPA Canada.

About the Author

Gabe Hayos, FCPA, FCA, ICD.D

Vice-president, Taxation, CPA Canada