Processing reviews are quite common when you file your return with tax software and therefore don’t submit any forms or other documentation. CRA is simply doing a spot check to see if you have proper documentation for some of your deductions.
I find the language used in the CRA letter to be quite amusing:
“To determine if we have assessed your return correctly, we need additional information.”A more accurate, but more adversarial statement would be
“We need to see documentation to make sure you’re not a lying deadbeat.”Don’t get me wrong, though. I’m quite happy that CRA does these processing reviews to keep people in line. Otherwise cheating would be rampant and honest people would have to pay more taxes to make up the difference.
I do feel sorry for those who manage to lose their documentation in the few months since filing their taxes. It wouldn’t be too hard to imagine that a box gets lost in a move or any number of other ways to lose some paperwork.
I can see this being a particularly difficult problem for someone running a small business with low margins. If you have revenues of $250,000 and total costs of $200,000 (not including paying yourself), having even a small percentage of the deductions disallowed due to inadequate documentation could be devastating.