When taxpayers ask, what is initial contact letter from CRA, it refers to the Canada Revenue Agency’s first written notice that an audit has begun. This letter outlines the specific tax years under review, the documents requested, and the questions that must be answered.
It is a critical step because it signals the start of the audit process, and how you respond will shape the outcome.
What is Initial Contact Letter from CRA: Purpose of the Initial Contact Letter
The initial contact letter informs you that your tax filings are under review. It provides:
- The years of tax returns being audited.
- A list of required documents or records.
- Questions that the CRA expects you to answer.
Reading this letter carefully is essential to understand the scope of the audit and to prepare an appropriate response.
Responding to the CRA’s Request
After receiving the letter, taxpayers must provide documents or information within the timeline specified. While the CRA may request extensive records, it is not always necessary to submit everything.
Responding accurately and only with relevant information helps protect your position during the audit.
Next Steps in the Audit Process
- Proposal Letter – After reviewing submissions, the CRA may issue a Proposal Letter outlining its findings. This is not final and can be challenged.
- Taxpayer Response – You can respond with further documentation and legal arguments to dispute the Proposal Letter.
- Audit Conclusion – The audit ends either with:
- No Change: The CRA confirms your tax return was correct.
- Adjustment: The CRA makes changes and issues a Notice of Reassessment, which may result in more taxes owed.
- No Change: The CRA confirms your tax return was correct.
Options if You Disagree with the Reassessment
If you receive a Notice of Reassessment, you have 90 days to file a Notice of Objection.
If more time is needed, an Application for an Extension of Time can be submitted within one year after the 90-day deadline, although approval is not guaranteed.
FAQ: What is Initial Contact Letter from CRA
1. Why did I receive an initial contact letter from CRA?
You received it because the CRA selected your tax returns for audit and needs documents or clarification.
2. How much time do I have to respond to an initial contact letter?
The deadline is usually outlined in the letter, often 30 days. Meeting the deadline is important to avoid further action.
3. Do I need to provide everything the CRA asks for?
Not always. You must provide relevant information, but excessive disclosure can complicate the audit. Seek guidance if unsure.
4. What happens after I respond to the CRA initial contact letter?
The CRA reviews your documents, may issue a Proposal Letter, and then makes a decision on whether changes are required.
5. Can I dispute the CRA’s audit findings?
Yes. You can respond to the Proposal Letter, and if reassessed, you can file a Notice of Objection within 90 days.
6. What is the difference between an initial contact letter and a Proposal Letter?
The initial contact letter starts the audit, while the Proposal Letter outlines the CRA’s findings and potential adjustments.
7. Should I hire a tax professional if I receive an initial contact letter?
It is highly recommended, as professionals can help you respond strategically and avoid unnecessary penalties.
