AD-20-01 – Standard Timelines for Information Requests to Taxpayers for Audit Purposes
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Standard Timelines for Information Requests to Taxpayers for Audit Purposes
Number: AD-20-01
Date: 2020-08-07
Issued by: Compliance Programs Branch (CPB)
Section Affected: International and Large Business Directorate, Small and Medium Enterprises Directorate, GST/HST Directorate, High Net Worth Compliance Directorate, and Scientific Research and Experimental Development Directorate
Subject: Standard Timelines for Information Requests to Taxpayers for Audit Purposes
Purpose
The purpose of this communiqué is to provide guidance with respect to obtaining information from taxpayers for the purposes of administering and enforcing the Income Tax Act (ITA), Excise Tax Act (ETA) and any other applicable legislation for audit purposes.
The communiqué provides information for employees following actions taken by the Canada Revenue Agency (the Agency or the CRA) to address the Office of the Auditor General of Canada's recommendation explained in paragraph 7.35 of Report 7 – Compliance Activities – Canada Revenue Agency of the 2018 Fall Reports of the Auditor General of Canada (the "OAG Report"), tabled in Parliament on November 20, 2018.
OAG recommendation 7.35 (timelines/time limits):
Recommendation. The Canada Revenue Agency should set time limits for all audit workloads to provide information requested and should consistently enforce the provisions of the Income Tax Act to compel taxpayers to produce information once those time limits have passedFootnote 1.
CRA response to OAG recommendation 7.35 (timelines/time limits):
The Agency's response. Agreed. The complexity of the request drives the time provided to respond, and legislation prescribes the time allowed for the Canada Revenue Agency to finalize compliance work. The Office of the Auditor General of Canada identified a lack of fixed timelines for more complex Agency requests in which auditors have to use their judgment and court action is more likely to be required to secure cooperation. The Agency, for audit workloads, will set timelines for information to be provided, criteria for extensions, and more formal deadlines, past which the Agency would move to the courts to compel cooperation, by March 2020Footnote 2.
This communiqué applies to CRA officialsFootnote 3 who have the authority to examine the books and records of and obtain information from taxpayers that may be relevant in the administration or enforcement of the ITA, the ETA and other applicable legislation for audit purposes. It applies to the administration of civil matters only.
The guidelines included in this communiqué should be read in conjunction with other CRA policies and guidelines on information requests to taxpayers, including, but not limited to, communiqué AD-10-02, Use of Information Gathering ToolsFootnote 4, and communiqué AD-19-02R, Obtaining Information for Audit PurposesFootnote 5.
Standard Timelines
As taxpayers have access to information pertaining to their tax obligations and entitlements, they are expected to cooperate with CRA officials, to respond to requests for information and to provide further explanation, if required. When initiating these requests to taxpayers, CRA officials will adhere to established standard timelines for taxpayers to respond as outlined in Annex A.
The types of information requests to taxpayers, for audit purposes, include:
- Preliminary request for relevant books and records
- Additional request for information / additional audit query
- Response to a proposal letter
In order to treat taxpayers fairly, the complexity of the request, as well as the availability of the information requested and/or extenuating circumstances, should be considered when setting the initial timeline. Potential criteria for initial timelines include, but are not limited to, the following:
- Documents and/or information that are located outside the country
- Archived documents and/or information related to older tax years
- Documents and/or information that are retrievable through complex searches
These criteria are not intended to be exhaustive and professional judgment should be used when determining the proper initial timeline. Any requests concerning information not readily available must be documented in the audit file.
It is CRA's expectation that taxpayers will be able to satisfactorily respond to the majority of these requests by the initial request deadline. Where a taxpayer does not satisfactorily respond to the initial request by the deadline or requests additional time, then a follow-up request may be issued with a revised deadline.
A request from a taxpayer for additional days past the initial deadline should be granted for factors or events that are outside of the taxpayer's control, such as illness, death, natural disaster, and may include a change in representative. These events or factors are not intended to be exhaustive and professional judgment should be used when issuing revised timelines. The justification for granting or disallowing any additional days to respond to a request must be documented in the audit file.
In addition, the follow-up request will include a warning that a compliance order may be sought by virtue of section 231.7 of the ITA or section 289.1 of the ETA. There will be no further additional days provided beyond the follow-up request.
Auditors must follow all CRA and program specific policies when pursuing a compliance order.
The deadline for a response to a proposed reassessment ("proposal letter") should take into consideration statute-barred dates and treaty time limits. The timeline for a response to the initial request and/or the follow-up request may be shortened, or the follow-up request may be eliminated/denied, as appropriate. Auditors should be mindful of the impact of further communications between the CRA and the taxpayer on statute-barred dates and treaty time limits. (See the appropriate section of the audit manual for your program on accepting waivers in certain circumstances.)
The suggested timelines in Annex A have been set at the branch level for all audit programs in the Compliance Programs Branch (CPB).
Communication with Taxpayers for Information Requests
The Agency commits that CRA officials will communicate with taxpayers or their representatives within 30 days of the receipt of the information requested and will inform the taxpayer of the next steps in the audit process.
By communicating with the taxpayer on information requests and informing them of the next steps, the CRA will provide better service to taxpayers. This commitment will also ensure that information request timelines are respected and met by the taxpayers.
A timely discussion with the taxpayer will ensure that any required extensions are dealt with on a timely basis. Should stronger measures be required to compel taxpayer cooperation when such timelines have passed, up to and including court action, these measures will ensure that actions by the CRA are undertaken with greater fairness.
Monitoring of Information Requests to Taxpayers and Days to Complete Audits
The CRA implemented supplementary monitoring of information requests to taxpayers and time to complete audits, at the regional level, with the support of the quality review/assurance areas and the Headquarters (HQ) program teams.
It is recognized that the regions and HQ program teams already have monitoring procedures in place for certain program aspects. However, the CRA will continue to improve the monitoring of information requests to taxpayers for all programs and across all regions.
The rationale for monitoring information requests to taxpayers is to report on the standard timelines given to taxpayers to respond and to ensure that these requests to taxpayers are being respected and met. The CRA will also ensure that all types of taxpayers, whether they are individuals earning income from Canadian sources, or large corporations with complex structures, are treated consistently.
Conclusion
Please direct any questions relating to this communiqué to your functional program contact within Headquarters.
Original signed by
Ted Gallivan
Assistant Commissioner
Compliance Programs Branch
Circulate to:
- Assistant Directors of Audit
- Regional Directors of Programs
- Regional Program Advisors
- Directors General, International and Large Business Directorate, Small and Medium Enterprises Directorate, GST/HST Directorate, High Net Worth Compliance Directorate, Scientific Research and Experimental Development Directorate, Criminal Investigations Directorate, Compliance Services Directorate
Annex A: Standard Timelines
Type of Request | Initial Request | Follow-up Request | |||
---|---|---|---|---|---|
n/a | Initial DeadlineFootnote 6 |
Responsible Approval Level | Revised Deadline | Total Days | Responsible Approval Level |
Preliminary request for relevant books and records | Up to 30 days | Auditor | Up to an additional 60 daysFootnote 7 | Up to 90 days | Case Manager / Team Leader |
Additional request for information / Additional audit query: | n/a | n/a | n/a | n/a | n/a |
(a) Information readily available | (a) Up to 15 days | Auditor | (a) Up to an additional 30 daysFootnote 7 | (a) Up to 45 days | Case Manager / Team Leader |
(b) Information not readily availableFootnote 8 | (b) Up to 30 days | Auditor | (b) Up to an additional 30 daysFootnote 7 | (b) Up to 60 daysFootnote 7 | Case Manager / Team Leader |
(c) Information not readily available and extenuating circumstancesFootnote 8Footnote 9 | (c) Up to 60 days | Case Manager / Team Leader | n/a | n/a | n/a |
Response to a proposal letterFootnote 10 | 30 days | Auditor | Up to an additional 30 daysFootnote 11 | Up to 60 days | Case Manager / Team Leader |
Footnotes
- Footnote 1
-
Office of the Auditor General of Canada [OAG], Compliance Activities – Canada Revenue Agency, Report 7 of the 2018 Fall Reports of the Auditor General of Canada, paragraph. 7.35.
- Footnote 2
-
Ibid., paragraph. 7.35.
- Footnote 3
-
In the context of this policy, an "official" is a person who is authorized by the Minister of National Revenue to perform their duties in accordance with sections 231.1 to 231.5 of the ITA, sections 288 to 292 of the ETA and other analogous provisions in applicable legislation
- Footnote 4
-
Canada Revenue Agency, AD-10-02, Use of Information Gathering Tools. Date: June 16, 2010.
- Footnote 5
-
Canada Revenue Agency, AD-19-02R, Obtaining Information for Audit Purposes. Date: June 3, 2019.
- Footnote 6
-
It is CRA's expectation that taxpayers will be able to satisfactorily respond to the majority of these requests by the initial request deadline.
- Footnote 7
-
Where a taxpayer does not satisfactorily respond to the initial request by the deadline or requests additional time, then a follow-up request may be issued with a revised deadline. 2.1 A request from a taxpayer for additional days past the initial deadline should be granted for factors or events that are outside of the taxpayer's control, such as illness, death, natural disaster, and may include a change in representative. These events or factors are not intended to be exhaustive and professional judgment should be used when issuing revised timelines. The justification for granting or disallowing any additional days to respond to a request must be documented in the audit file. 2.2 The follow-up request will include a warning that a compliance order may be sought by virtue of section 231.7 of the ITA or section 289.1 of the ETA. There will be no further additional days provided beyond the follow-up request.
- Footnote 8
-
The term "information not readily available" may include, but is not necessarily limited to, documents and/or information that are located outside the country, archived documents and/or information related to older tax years, or documents and/or information that are retrievable through complex searches. These criteria are not intended to be exhaustive and professional judgment should be used when determining the proper initial timeline. Any requests concerning information not readily available must be documented in the audit file.
- Footnote 9
-
In extenuating circumstances and when reasonable based on the facts of the case, such as where it is clear and readily apparent to the CRA that the response to the initial request for information or the response to an audit query is expected to go beyond 30 days, the auditor may grant an initial response timeline beyond 30 days with the consent of the responsible approval level, and, as appropriate, with a request letter in the form of a compliance order warning letter. The justification for granting an initial response timeline beyond 30 days must be documented in the audit file and must not exceed 60 days.
- Footnote 10
-
The deadline for a response to a proposed reassessment ("proposal letter") should take into consideration statute-barred dates and treaty time limits. The timeline for a response to the initial request and/or the follow-up request may be shortened, or the follow-up request may be eliminated/denied, as appropriate. Auditors should be mindful of the impact of further communications between the CRA and the taxpayer on statute-barred dates and treaty time limits. (See the appropriate section of the audit manual for your program on accepting waivers in certain circumstances.)
- Footnote 11
-
Unless there are extenuating circumstances, once the follow-up request timeline has passed and there has been no response to the follow-up request, the auditor should proceed with the originally proposed reassessment.
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- Date modified:
- 2024-04-19