Pre-Filing Audits: CRA Targets Tax Pro Errors

On January 17, 2014, CRA announced a new Registration of Tax Preparers Program (RTPP) under which it intends to have all tax practitioners register and be assigned a new PIN number so that CRA can target those with high error rates and intervene with “pre-assessment” visits to promote accuracy during tax season.

The goal is greater compliance and accuracy, and could result in audits of client files if accuracy factors do not improve.

A “three part plan” was unveiled to achieve these goals:

• The Liaison Officer Initiative (LOI),
• The Registration of Tax Preparers Program (RTPP),
• An Enhanced Focus on High Risk Files, a program that has already started. 

CRA wants to better identify and address common and recurring errors with pros before tax returns are filed in order to decrease post-assessment tax audits. CRA will assess individual tax preparer compliance issues, identify and assess risks, and evaluate where recurring errors occur.

CRA anticipates that taxpayers and their representatives should see some benefits in all of this, too: a better understanding of their tax obligations and responsibilities, and fewer hours spent fixing returns in the summer months, for example.

But make no mistake (pun intended), CRA will fine pros who have poor error factors, if they:

• failed to take reasonable care and exercise proper due diligence to correct errors, or
• are deliberately non-compliant.

Sanctions will also be required if a tax preparer prepares a return for a fee but has the taxpayer, or another tax preparer, file the return in an attempt to avoid the requirement to register.

The announcement has stunned some members of the tax preparation community, who will be already extremely busy working with clients in the time the proposed audits are to take place. Others feel there are many positives with this initiative. Public consultations begin next month and the initiative will launch as a pilot in Ontario at the same time; Quebec next year and then roll out across Canada. 

Knowledge Bureau's KBR will be monitoring developments and submitting comments and presentations to CRA through the submission process. It is our intention to represent the interests of our designates and students. Your input is welcome. For more information, see http://www.cra-arc.gc.ca/rtpp/.

Alan Rowell, MFA, DFA-Tax Services Specialist, will present and analyze impacts from Toronto and Evelyn Jacks, President of Knowledge Bureau, will present and comment from Winnipeg.