CRA Audit: What to Expect & How to Respond

Types of CRA Reviews

Processing Review

• Most common type
• Request for documentation to support claims
• Usually handled by mail
• Examples: Medical receipts, donation receipts

Matching Program

• CRA compares slips from employers/banks to your return
• Automatically flags discrepancies
• May receive adjustment notice

Desk Audit

• More detailed review by CRA officer
• May request extensive documentation
• Done remotely (by mail/phone)

Field Audit

• In-person examination
• Usually for businesses or complex situations
• Auditor may visit home or business
• Most comprehensive review

What Triggers an Audit?

Red Flags

• Large deductions relative to income
• Significant year-over-year changes
• Cash-heavy businesses
• Home office claims
• Rental losses for multiple years
• High charitable donations
• Missing income slips

Random Selection

Some audits are completely random—not because of anything you did wrong.

Tips and Informants

CRA investigates tips about unreported income or fraud.

When CRA Contacts You

Letter Requests

Most common contact. The letter will specify:

• What documentation is needed
• Deadline to respond (usually 30 days)
• Contact information for questions

Phone Calls

• CRA may call for simple clarifications
• Verify it's really CRA (call them back)
• Never give sensitive info unless verified

How to Respond

Step 1: Read Carefully

• Understand exactly what's requested
• Note the deadline
• Don't ignore the letter

Step 2: Gather Documents

• Find receipts for claims in question
• Organize by category
• Make copies (keep originals)

Step 3: Respond Timely

• Meet the deadline
• Request extension if needed (before deadline)
• Send only what's requested

Step 4: Keep Records

• Copy everything you send
• Use registered mail or courier
• Note dates and tracking numbers

Your Rights During an Audit

Taxpayer Bill of Rights

• Right to be treated professionally
• Right to privacy and confidentiality
• Right to a formal review and appeal
• Right to pay only required taxes
• Right to have costs considered

What You Can Do

• Ask for clarification
• Request deadline extensions
• Have a representative
• Appeal decisions

If You Can't Find Documents

Try to Reconstruct

• Bank statements showing payments
• Credit card statements
• Request duplicate receipts from vendors
• Affidavits as last resort

Be Honest

If you don't have proof, explain the situation. CRA may accept partial documentation or reduce (not eliminate) the claim.

Possible Outcomes

No Change

CRA agrees with your return—case closed.

Adjustment

• CRA changes your return
• May owe additional tax + interest
• Receive Notice of Reassessment

Penalties

May apply if:

• Gross negligence in claims
• False statements
• Repeated offenses

When to Get Help

Consider Professional Help If:

• Complex business audit
• Large amounts at stake
• You don't understand the request
• Feel overwhelmed by process
• Potential fraud allegations

Who Can Help

• Accountant (CPA)
• Tax lawyer
• Licensed tax preparer

Preventing Future Audits

• Keep excellent records: 6 years minimum
• Report all income: CRA sees your slips
• Claim only legitimate expenses: With proof
• Be consistent: Sudden changes raise flags
• File on time: Late filers get more scrutiny