Understanding a CRA audit
A CRA audit examines records to check whether amounts reported on a tax return are accurate and complete. An audit does not, by itself, mean the taxpayer has done something wrong. Individuals and businesses can both be selected.
What can lead to an audit?
CRA uses risk assessment and other methods to select files. Areas that may prompt additional scrutiny include unusually large or inconsistent deductions, substantial self-employment expenses, rental or property transactions, discrepancies with third-party information, and recordkeeping concerns in cash-intensive businesses. These are possible risk indicators, not guaranteed audit triggers. Some files are also selected through other compliance initiatives.
What types of CRA reviews are there?
Not every CRA request is a full audit. A processing review or matching exercise may ask for specific documents or explanations. A full audit may involve broader examination of books, records and supporting evidence. Read the letter carefully to understand exactly what is requested.
What should I do if I receive a CRA letter?
Confirm the letter is genuinely from CRA, note its response deadline, identify the tax year and issue, and assemble the relevant receipts, invoices, contracts and statements. Respond accurately and on time; if more time is needed, contact the assigned CRA officer to discuss an extension. Keep copies of all correspondence.
Can a tax professional help?
With proper authorization, an accountant or tax representative can help organize documents, clarify the scope of CRA’s request and communicate with the agency. Professional assistance can make the process easier, but it does not guarantee any particular audit outcome or prevent CRA from extending its review when warranted.
The bottom line
A timely, organized response is the best first step. Learn about our CRA audit and review support or reach out to our team.