My T4 client was sent employment review letter last year and the appeal is still ongoing for employment expenses with CRA. She prefers not to claim large legit employment expenses due to concerns about triggering another audit which be another waste of time and resources and money, she says.
What do you think of that? because she was reviewed last year, will CRAs still send a review letter again even the claimed expenses are low?
Yeah, some clients are like that. Best to inform them about the risk of audit/review before spending time gathering/calculating and filling out the T777. Let the client decide whether to include the claim or not. Saves you headaches liked this.
On the other hand, if you guaged the risk as low, and CRA questioned it anyway, apologize and explain that you’re not a fortune teller - you can’t guarantee “no audit”.
Further, if your client is concerned about the cost (paying you to respond to CRA audit), you can offer “audit insurance” - you’ve probably seen ads for that, right?
My thoughts on the matter are that if the claim goes through without any problems because you have all the back up they are much less likely to ask for it again this year regardless of how much expenses you claim. If on the other hand, the CRA makes changes in their favour to match the back up you provide they are more likely to audit again the next year even if the expenses are minimal.
I always warn clients that employment expenses are a commonly reviewed line item and tell them to make sure they have all the required back up. If I think their back up is weak, I’ll strongly advise not to claim but in the end, the decision is theirs.
These reviews sometimes take months or even a year plus so yeah if you think the back up is weak, I would err on the side of caution and don’t claim this year. Especially if the client is nervous.
So they will review the next year even if we are still appealing last reassessment as they missed so many things in the initial review?
Now, if we don’t claim much and they ask for a review, can we put back the claims we didn’t include because we didn’t want to be reviewed? will CRA adjust up if they find the new add claims legit or still go with what we claimed initially and ignore our claims?
I have claimed additional medical upon review that got missed when I filed the original return and they allowed it. I don’t think they have a problem adding things in with back up. I’d claim it all anyway in the second year as if you decided to wait until after the first review was processed and they allowed everything - amending the 2nd year return at that point to add in a bunch of receipts likely will trigger a request for more information anyway.
I’ve had clients on where they’re reviewed for the current year and CRA is still dipping over the past several years, some with allowed expenses, some being argued on…it happens. I wouldn’t “not claim” them just because CRA gets their knickers in a twist. But…it’s the client’s money.