Seniors Targeted? The Tax Audits Begin

Ruth Horst

The Canada Revenue Agency (CRA) routinely reviews or audits tax filings, including personal, trust, corporate, and HST returns. The most common types of reviews that focus on personal tax returns include, but are not limited to, Pre-Assessment Reviews, Processing Reviews, and the Matching Program. This year there is a new focus: the Multigenerational Home Renovation Tax Credit introduced to help families better care for their elders. But claiming it, like other tax benefits, comes with a tax snare. Read on to learn more.

The Backdrop. The CRA selects tax returns for audit based on a risk assessment system that identifies those with a high likelihood of non-compliance. If selected, the taxpayer will receive a letter requesting documentation to support a specific line item on the return. The taxpayer has 30 days from the date of the letter to submit the requested documentation. Upon completion of the review, a Notice of Reassessment may be issued..

The Mission. The government is seeking to raise significant revenue to fund billions of dollars in planned spending. The CRA has announced its intention to increase tax collections, with a strong focus on tax evasion, tax fraud, benefit fraud, GST rebate and refund audits, as well as both domestic and international tax avoidance schemes. To support these efforts, the CRA is leveraging artificial intelligence (AI) to detect fraud and flag unusual deductions. Additionally, the CRA is working with over 100 countries to implement data-sharing agreements aimed at combating offshore tax evasion. We can expect to see a significant increase in the number of reviews and audits that the CRA will be conducting.

What’s New? This year, a new refundable tax credit—the Multigenerational Home Renovation Tax Credit (MHRTC)—was introduced. This credit allows a claim of up to $50,000 for the creation of a qualifying self-contained secondary unit for a senior or an adult with a disability, with a maximum refundable amount of $7,500.

In Practice, Rejection by CRA. I work in a small practice and one of my clients—let’s call them Doug and Donna for the purposes of this article—qualified for the new MHRTC. Doug is 79 years old and his wife, Donna, is 74.

Due to declining health, Doug and Donna’s daughter suggested they explore a living arrangement that would allow them to stay close while maintaining independence. They ultimately decided to finance an addition to their daughter’s home, creating a self-contained unit where they could live comfortably. Fortunately, the timing aligned perfectly with the introduction of this new tax credit.

We claimed the MHRTC on their return, which was then selected for a Pre-Assessment Review. We submitted all of the required documentation, but when the return was assessed, the credit was denied.

I contacted the Pre Assessment Review department to find out why. The agent I spoke with was unable to access the documents we had already submitted and began listing the required documentation—items we had in fact already provided. The agent could not explain why the credit had been disallowed but did initiate a second review of the submitted materials.

The Collection Letters Begin. Meanwhile, Doug and Donna have begun receiving letters from the CRA requesting repayment, which has caused them considerable stress and concern about their compliance status.

Communication Lapses Abound. While not directly related to a review, another client—let’s call her Lila—is a 91-year-old family friend who occasionally files her taxes with our office and sometimes elsewhere. In February 2025, she was contacted by CRA Collections and informed that she owed over $7,200. She requested a formal letter with an explanation, which was eventually issued in early April.

It appears that the CRA began issuing TFSA proposed return notices as early as March 2024. Unbeknownst to Lila, she had somehow been enrolled in online mail delivery. Lila looked through her email history and confirmed that she had never received a single CRA email notification, she had also not received any paper correspondence over the past year from CRA, and her authorized representative had not been notified either.

Worse, and what’s most concerning is that the TFSA over contribution issue dates back to 2017. CRA only took action seven years later. Had Lila been notified in 2018, she would have paid the penalty and resolved the matter promptly.

The Confiscation of Credits Begins. Despite this lack of communication, the CRA began applying all of her benefits—the Canada Carbon Rebate CCR, GST/HST credit, Ontario Trillium Benefit (OTB), and the Ontario Senior Homeowners’ Property Tax Grant (OSHPTG)—toward the outstanding balance.

The Role of the Advisor: Build Confidence in Navigating Complex Tax Issues. As audit activity ramps up—especially in sensitive areas like senior benefits and refundable credits—it’s never been more important to ensure accurate, defensible tax filing. The Income Tax Fundamentals Certificate is an excellent starting point for those entering the profession or looking to build confidence in the core principles of personal tax preparation. With practical training on CRA compliance, credits, benefits, and audit response, it equips you with the skills needed to protect clients, like Doug, Donna, and Lila, from costly misunderstandings and missed opportunities.

The Bottom Line: These incidents raise concerns about how the CRA engages with seniors—many of whom are diligent about paying their taxes and place a great deal of trust in the agency. It’s troubling to consider what happens to those who don’t have access to a knowledgeable tax professional to help them navigate the complexities of the system. How many are being forced to dip into their savings to resolve unexpected balances owing – or cover cash flow shortages because their tax benefits have stopped? Who is advocating for them?  This could be you, and it’s a noble calling to help.