I’ve practiced Canadian small business and personal tax since 2010 (if you count Co-ops) and got my CA in 2013. Up until last fall I worked at PwC and managed their T1 program for the last 3 years before I left and started my own firm with my wife who is also a CPA (she handles the review/NTR side of our practice since she has a decade of experience in assurance at Deloitte).
In our first year of practicing on our own we did 128 T1s. I’ve had to handle almost 20 T1 Process Review letters for my clients (that’s a rate of 15.6%). This seems crazy based on my experience with PwC. At PwC, I managed a little over 1,000 T1s and had to handle maybe 50 per year (5%). I’m seeing 3x more process review requests than I was at PwC.
I’m hoping that CRA is perhaps noting us as a new e-filer/firm and has us in a higher risk = more samples bucket. I’m hoping that once they see that we’ve had 20/20 successful T1 Process Review submissions with no reassessments this year they will back off a bit (the only infraction we had was putting provincial political contributions as federal, minor keying error with no impact on taxes owing).
Has anyone who has their own practice notice an uptick in T1 Process Review requests in their first year of practice? Or is CRA just stepping up their game across the board?
I may need to rethink our fee structure if this is going to be an ever increasing occurrence. Right now our T1 fees cover the potential handling of a T1 Process Review.
I imagine CRA is doing this based on you being a new efiler (they don’t know/care about your previous experience). If your 2021 reviews work out well then you should see much fewer requests in the future. It also depends on what is on the tax returns. I find that I receive a higher rate of requests for clients in long term care. Some areas just have a higher error rate and get checked more often. Processing reviews can be time-consuming, though.
The CRA seems to be particularly enthusiastic this year, perhaps because they did not do a huge amount the previous two years.
I have received about 1 a day for the past two weeks. Mind you, they are not too happy with me when, during a phone call with them about six weeks ago about the lack of action on their part for one client and an unwillingness to provide any direction as to the length of time they will continue to take and that the telephone operators are not permitted to release that information, I commented that I should start writing and submitting an inquiry to the processing review as to how much longer they need to complete the pre-assessment process.
The telephone operator wasn’t happy and submitted a note to management. But my client’s return was assessed within two weeks.
I, too think they are just playing catch-up (& “find money”). What I found when I went on my own a few years ago is that they absolutely were aware of where I had worked previously and that I wasn’t new to EFILE (?), I didn’t notice any increase in reviews…
What I did do was code my files for the review letters to be sent to the client. Some clients will submit their own responses, and for others (most of them) I submit on their behalf, but I find it much more manageable this way. Clients see the letter, what’s being requested and timelines so they have primary responsibility.
I would say probably new e-file number. We filed just over 3000 returns and as of today have had 34 reviews. I seem to remember back when we started e-filing there was more reviews and as time went on with no reassessments things calmed down. Most of our reviews are for large donation and medical expense claims, stuff you would expect to be reviewed.
Although it sounds like a good idea to have your clients respond to these letters, I’d exercise caution with that. CRA is notorious for asking questions that are designed to cause more problems than solve a few.
I always tell my clients that if they get a letter or a call from CRA they are to refer it to me to respond so that nothing more or less than asked is provided, thus shutting the door to more potential headaches.
That’s what they pay us for - our expertise in all facets of tax, not just filing the return.
I wanted this aspect of personal taxes to be our service differentiator. I know during my time with PwC, we would ensure all correspondence went to the client and they would have to come to us for help, giving the opportunity for more billables. That frustrated me and left a bad taste in my mouth.
In our new practice, I wanted our T1 fees to also provide peace of mind that any CRA questions that come will be handled (anything short of an audit, which we can handle as well but would be quoted for at such a time). It provides something tangible to justify our fees that are higher than the H&R Blocks of the world other than just “A CPA is doing your return from start to finish.”
I was just surprised at the amount of requests I received this year.
I agree with you but your client needs to know that you’ve received these processing review requests and that you’ve taken care of it for them. Otherwise, they don’t see (and appreciate) the added value you provide.
I’ve recently received a couple Processing Review letters for foreign taxes claimed on 2019(!) tax returns.
Exactly. I do submit the review responses on their behalf in almost all cases & don’t bill extra for it, they don’t want to communicate with CRA either. I just really prefer the clients getting that mail - I’ve got better things to do than chase them down during the summer months…
I answer CRA, often without notifying the client at the time, and when the case is successfully resolved, advise them after the fact that it’s been dealt with and there is no adjustment. If there is a change, I notify them to expect a bill from CRA and why that is so. Never had an issue doing so.