Understand the mistakes
If you find a mistake in your tax return, take a deep breath and don’t panic. The CRA isn’t going to hunt you down, demand payment and threaten to drag you into tax jail like a CRA scam call might suggest. You can fix the mistakes, but first, you’ll have to find them.
Double check that the information you gave your accountant is reflected accurately. You have the ultimate responsibility to provide all relevant documentation that the accountant needs to make the most accurate return. Don’t blame the accountant if you’re expecting a deduction from your RRSP contributions, for example, but didn’t provide any of your contribution slips.
Let’s say you’re sure you gave the accountant everything they need and are still convinced the accountant messed things up. There are a few preliminary things you should do:
- Take your return and mark up obvious typos, anything that you either don’t understand or doesn’t meet your expectations.
- Prepare a list of questions to ask your accountant that will help you understand the decisions that went into preparing your tax return.
Don’t hesitate to give the CRA a call if you need to clarify any finer details. For individual tax inquiries, you can call 1-800-959-8281 from anywhere in Canada or the United States. Estimated call-in wait times are listed on the CRA’s contact information website and you can get through more quickly if you call in on certain days, like on Thursdays or Fridays.
What does the CRA have to say about mistakes on your tax return?
The unfortunate part about discovering a mistake – regardless of who is to blame – is that you are the one on the hook to make things right with the CRA. That means that you are responsible for any additional taxes owed and any interest or penalties on unpaid taxes that result from errors in your return. You are also responsible for making sure that you or your accountant fix any mistakes.
Interest and penalties
If the mistake in your tax return results in additional taxes that you owe the CRA, the CRA will start to charge interest, compounded daily, on the amount you owe starting May 1 (true to 2019) until the balance is paid in full. This interest rate changes every 3 months.
If your accountant filed your tax return after the due date, typically April 30 of the calendar year, the CRA will charge a late-filing penalty. The penalty will be 5% of what you owe plus 1% of what you owe for each full month your return is late (for up to a maximum of 12 months).
What’s worse is that if you were late in filing in any of the last 3 years, your late-filing penalty will increase to 10% of your owed balance, plus 2% of what you owe for each month your return is late (up to a maximum of 20 months).
Even if you can’t pay the taxes you owe by the due date, make sure your accountant files your return on time so you avoid the needless expense of the late-filing penalty.
What does it take to fix a mistake on your tax return?
The CRA’s process to fix mistakes on your filed return is pretty straight forward. Before you or your accountant can make an adjustment to your filing, you will have to wait to receive your Notice of Assessment from the CRA. This is important- you may experience processing delays if you make an adjustment request to your return before you get your Notice of Assessment.
After you’ve received and reviewed the Notice of Assessment, mistakes in your return can be fixed in one of the following three ways:
- Online: using the CRA’s secure online service My Account (www.cra.gc.ca/myaccount), via the Change My Return option;
- By mail: Send a completed T1 Adjustment Request Form (T1-ADJ) and all supporting documents for the changes, to your tax center; or
- By mail: Send a signed letter (including your name, address, Social Insurance Number, phone number) and all supporting documents to your tax center detailing your request for an adjustment to your return.
Changes can be requested for any return from the last ten years, including the current tax year. Keep in mind that you will need to prepare and submit separate forms or letters if you want to make changes to returns from different years.
Once your adjustment has been filed, sit back and wait until the CRA has a chance to reassess.
How long does it take for the CRA to reassess a corrected tax return?
Any corrections that are resubmitted to the CRA for reassessment will take some time to get processed. In most cases, it will take:
- Up to 2 weeks, if submitted online; or
- Up to 8 weeks, if submitted by mail.
In some cases, it is possible for the process to take longer if the changes you want to make are more complicated. If they need more information or have questions, the CRA may reach out to you or your accountant for answers or more documentation.
After the CRA completes their review, they’ll respond with:
- A Notice of Reassessment that shows the changes to your tax return; or
- A letter explaining why the CRA didn’t make any of the changes you requested or explaining why no changes were needed.
Whatever the outcome of the reassessment, you, not your accountant, are still responsible for settling what you owe with the CRA.
Work with your accountant to adjust your tax return
Once you have understood where the mistakes are, received some clarifying answers from your accountant and know what needs to be done to make things right with the CRA, it’s time to connect back with your accountant to review your case.
Lay out your situation and work with your accountant to address your concerns. Don’t forget, you’ll need your Notice of Assessment before your accountant can file your adjustment. Give them some time to make the necessary corrections; when it’s ready, make sure you review the changes before you give your accountant the green light to refile.
While some tax preparers may offer a goodwill gesture to make up for messing up your return, don’t let them off the hook that easily. Dig out the terms and conditions of your tax preparation contract and read them again carefully.
A quick look at the fine print will help you understand how they are supposed to handle this type of situation. The contract should clearly outline what actions they will take to make things right if they are at fault for making mistakes.
You may be entitled to a reimbursement and ongoing support; it’s possible that your tax preparer may be obligated to pay for the interest and penalties accrued and will offer advice on dealing with the CRA. However, it’s not likely they will pay for any extra taxes you owe. Keep in mind that the obligation may not apply if they determine that you were the cause of the error because you withheld any relevant information.
Learn from the experience
Your best bet to safeguard against your accountant filing a tax return with mistakes is to read through the return before you sign off. Accountants will typically ask you to review your return and sign a statement agreeing that you certify all the information is correct and accurate.
Not reviewing before signing off can cost you a significant amount in extra taxes and penalties. When you review it up front, you’ll have the opportunity to understand the mistakes and have your accountant explain or fix the errors before he or she files with the CRA.
If you find mistakes after your return has already been filed, act quickly following the CRA’s process to limit the impact of an inaccurate return. If possible, aim for adjustments to be submitted before payments are due and interest or penalties kick in on May 1 (true to 2019).
At times, fixing mistakes on your return may also take patience to resolve. If you’re not happy with the way your accountant is handling your situation, it could also be a good time to start looking for a new tax preparer for the next year. When looking for the right accountant, it’s important to remember that not all professional tax preparers are created equal.
Start your search among your social circles for a referral from someone you trust. Search for reviews that can give you an understanding of the client experience and any pitfalls that you can expect. Once you’ve narrowed in on someone that might be a good fit, vet their credentials against their professional organization. For example, accountants holding a Certified Professional Accountant (CPA) designation will be listed in the CPA directory if they are a member in good standing.
Working with an accountant to fix mistakes on a tax return can be an eye-opening hassle and experience. Whether you are trying to get your return adjusted or have just come out the other end, take note of the lessons you learn along the way so you can minimize the chance of a repeat situation.
