Did you know the Canada Revenue Agency (CRA) carried out nearly 96,000 audits in the 2023–24 year?
That is up from about 63,000 the year before. A CRA audit can seem difficult. But understanding the Canada audit process, its triggers, and your rights can turn fear into confidence.
Why Does CRA Audit Business?
The CRA uses a form of audit risk assessment to pick files. They flag returns with:
- Unusual deductions or expenses
- Repeated losses
- Big changes in income or expenses
- Industries that use cash, like restaurants or contractors
- Discrepancies in T‑slip data (T4, T5, T3)
- Large GST/HST claims or missing returns
- Foreign assets, crypto, or platform‑economy income.
Automated systems also compare return to others in the same sector. Anyone with four or more consecutive business losses, or rental losses, may trigger a CRA audit trigger alert.
Types of CRA Audits Explained (Desk, Field, GST/HST)
1. Desk vs Field Audit
- CRA desk audit is handled by correspondence. It’s low‑impact and often limited in scope.
- CRA field audit involves visiting your workplace, home, or your accountant’s office, and is more in‑depth .
2. GST/HST Audit
Also called an Excise Tax Act (GST/HST) audit, this focuses on your HST collection, remittance, and input tax credits.
3. Payroll Audit
Checks if you reported T‑slips and remitted payroll deductions. Errors here can trigger reassessments.
4. Desk vs Field
The CRA applies a risk lens. High‑risk issues like undeclared income or big HST claims likely lead to a full field audit. Lower‑risk or isolated issues may just get a desk review.
How to Prepare for a CRA Audit (Checklist)
- Audit risk assessment using data comparison
- Income Tax Act compliance focus
- Excise Tax Act (GST/HST) audit priority
- Third‑party data matching from banks, employers, and others
- Tips from informants
Over 30% of audits look at medical expenses, donations, tuition, or foreign tax credit slips.
CRA Audit Steps: What to Expect After Selection
1. Notice of Audit
CRA sends a Notice of Audit by mail or phone. This starts the formal process.
2. CRA Audit Preparation
Act fast. Gather your audit documentation: all relevant T‑slips, invoices, receipts, bank statements, ledgers, contracts, payroll records, etc. Use the CRA audit checklist methodically.
3. Request for Information
You may receive a formal Request for Information. Respond completely and on time. Ask clarifying questions if needed.
4. CRA Desk Audit
Many audits begin as desk audits. You send documents online via CRA’s secure portal never by email , Canada.ca.
What Happens During a CRA Field Audit?
For field visits, the auditor brings ID and may request records onsite, including loaned documents with receipts. They may talk to employees .
What the Auditor Reviews
Auditor examines:
- CRA info: filed returns, property,and filings
- Business records: ledgers, invoices, journals
- Personal records: bank, mortgage, credit card
- Related-party records: spouse, corporate, or trust documents
- Adjustments made by accountants
- Indirect verification of income, like matching 3rd-party data
CRA Audit Timeline: What to Expect During and After
Audit Findings
Auditors may identify issues. You can discuss them then and there. Active engagement helps.
Outcomes
There are three possible audit results:
- No change: They confirm your tax return is correct. You receive a completion letter.
- More tax owed: You get a proposal explaining the reassessment.
- Refund owed: You get a proposal showing the credit or refund.
For proposals, you have 30 days to respond, accept, or dispute.
What If You Disagree With CRA’s Findings?
Step 1: Discuss With the Auditor
If you disagree with the proposal, start by raising concerns directly with the auditor. Provide additional documentation or explanations.
Step 2: Escalate if Needed
If unresolved, escalate to the auditor team leader (contact info is provided in the audit letter).
Audit Final Notice
CRA issues a Notice of Assessment or Notice of Reassessment with final figures.
Do You Need a CRA Audit Representative or Tax Lawyer?
It’s wise to get a tax lawyer or accountant to represent you. They can prepare explanations, ask for leniency, and guide through negotiation.
After the CRA Audit: Next Steps
Pay More Tax
If more is owed, CRA usually estimates the amount. You can pay before the notice to avoid interest.
Get a Refund
A reassessment in your favour means CRA sends a refund.
Filing a Formal Objection
You can enter the taxpayer objections process. This formal objection must be submitted within 90 days of the reassessment. You can dispute reassessments by filing a Notice of Objection.
CRA Audit Timelines: How Long Does It Take?
Audit length varies based on:
- Amount and complexity of records
- Scope (HR, GST/HST, payroll, income, etc.)
- Missing documents
- Need for consultation with specialists
Well‑organized records and prompt replies shorten CRA audit timelines significantly. If records are missing, CRA can help you source replacements. But delays are likely if documentation is late.
CRA Audit: Your Rights Under the Taxpayer Bill of Rights
Taxpayer Bill of Rights
You have 16 rights, including:
- Fair treatment
- Accuracy
- Privacy
- Objection and appeal
Also, the Commitment to Small Business ensures fair service.
Privacy Act
You also have privacy rights. CRA must follow rules under federal privacy legislation.
Your Responsibilities
- Comply with Income Tax Act compliance and Excise Tax Act
- Keep required records for at least six years
- Maintain electronically readable files
- Cooperate with all auditor requests
Failing to meet these can result in penalties or even criminal charges.
Audit Triggers & Checklist (Summary)
| Trigger | Details |
|---|---|
| Vehicle, travel, and home office claims | Businesses or rentals with repeated losses |
| Multiple loss years | Businesses or rental with repeated losses |
| Cash-heavy business | Restaurants, contractors, etc. |
| T-slip mismatch | CRA compares T4/T5/T3 data |
| Unreported foreign/crypto income | Especially with offshore assets |
| Large HST refunds or missing filings | GST/HST audit flags |
| Repeated errors or late filing | History increases risk |
| Informants or tips | CRA follows leads |
| Random selection | Some files are chosen at random |
Top Tips to Survive a CRA Business Audit
Dealing with a CRA audit can feel overwhelming, but a few simple steps can help you stay in control:
- Keep good records: Keep all receipts, invoices, and statements in one place. This includes both business and personal documents.
- Use the CRA’s secure portal: Don’t send documents by email. Use CRA’s secure online services to upload files safely.
- Understand the type of audit: Whether it’s a CRA desk audit or a CRA field audit, knowing what to expect helps you respond better.
- Watch for common CRA audit triggers: Large write-offs, mismatched T-slips, and big HST claims can all raise red flags.
- Respond on time: Always reply to the Notice of Audit or Request for Information before the deadline.
- Stay respectful and clear: Talk to the auditor calmly and honestly. If you’re unsure, ask questions or get help.
- Know your rights: The Taxpayer Bill of Rights protects you during the process.
- Get support if needed: A tax professional can help explain your situation and deal with CRA directly.
Need Help? Talk to Bestax Today
If you’re facing a CRA audit or want to make sure you’re prepared, Bestax can help. We guide individuals and businesses through every step of the Canada audit process, from CRA audit preparation to handling CRA audit representation. Whether it’s income tax, CRA GST/HST audits, or payroll reviews, our team is ready.
Don’t wait until it’s too late. Contact Bestax today and stay audit-ready.
Quick FAQs
What exactly is a CRA audit?
A CRA audit is a review carried out by the Canada Revenue Agency to make sure your tax filings are accurate and complete. It involves checking your income, expenses, and supporting documents to confirm you followed the rules under the Income Tax Act or Excise Tax Act.
How does CRA select files for audit?
The CRA uses a process called audit risk assessment to identify returns that may have errors or signs of non-compliance. They also use third-party data matching, past audit results, industry comparisons, and sometimes random selection.
What are the most common audit triggers?
Typical CRA audit triggers include high expenses or deductions, unreported income, repeated business losses, or large GST/HST refund claims. Mismatches between your tax return and T-slips or other third-party data also raise flags.
What’s the difference between a desk audit and a field audit?
A CRA desk audit is handled through correspondence and focuses on specific items in your return. A CRA field audit is more detailed and takes place in person, usually at your business, home, or accountant’s office.
What documents does CRA request during an audit?
CRA may request business ledgers, invoices, receipts, contracts, bank and credit card statements, and T-slip records. They can also ask for related documents from family members or other entities linked to your file.
What rights do I have under the Taxpayer Bill of Rights?
The Taxpayer Bill of Rights gives you the right to fair treatment, privacy, and timely information. You also have the right to file a complaint or objection if you disagree with how your case is handled.
How long does a CRA audit typically last?
Audit timelines vary depending on how complete your records are, how complex your return is, and how quickly you respond. A simple audit may take a few weeks, while more involved reviews can last several months.
What happens if I disagree with the CRA findings?
If you don’t agree with the auditor’s proposal, you can provide more documents or explanations. If it’s still unresolved, you can enter the taxpayer objections process by filing a Notice of Objection within the allowed time.
Can Bestax represent me during a CRA audit?
Yes. Bestax can handle your full CRA audit representation, communicate with CRA on your behalf, and help reduce your risk of penalties or reassessments.
How can I prepare in advance to reduce audit risks?
Stay audit-ready by keeping all tax records for at least six years, reporting all income, and filing on time. You can also speak with Bestax for help with CRA audit preparation and long-term compliance planning.
Disclaimer: The information provided in this blog is for general informational purposes only. For professional assistance and advice, please contact experts.
