CRA Audit: What to Expect and How to Prepare

Receiving an audit notice from the Canada Revenue Agency can send a chill down anyone's spine. But with proper preparation and the right support, a CRA audit doesn't have to be a nightmare. Here's what you need to know.

Why the CRA Audits

The CRA conducts audits to verify that taxpayers are complying with Canadian tax laws. Common triggers include:

• Inconsistent reporting: Numbers that don't match T-slips or third-party data
• High deductions relative to income: Claiming expenses that seem disproportionate
• Cash-intensive businesses: Restaurants, salons, and other cash-heavy businesses face higher scrutiny
• Random selection: Sometimes it's simply the luck of the draw
• Repeated losses: Claiming business losses year after year
• Tips from informants: The CRA has a Leads Program for reporting suspected tax evasion

Types of CRA Audits

Correspondence Audit

The CRA requests specific documents by mail. You respond by sending the requested information. This is the most common and least intrusive type.

Office Audit

You're asked to bring documents to a CRA office for review. Typically focuses on specific items on your return.

Field Audit

A CRA auditor visits your business location to examine records in detail. This is the most comprehensive type and usually applies to businesses.

How to Prepare

1. Don't Panic

An audit is not an accusation. Stay calm and professional.

2. Read the Notice Carefully

Understand exactly what the CRA is asking for. Respond only to what's requested — don't volunteer extra information.

3. Gather Your Documentation

Organize all relevant records:

• Receipts and invoices
• Bank statements
• Contracts and agreements
• Mileage logs
• Home office measurements
• Any supporting calculations

4. Hire Professional Representation

You have the right to have a CPA or tax lawyer represent you during an audit. This is strongly recommended — they know what auditors look for and can communicate effectively on your behalf.

5. Meet Deadlines

Respond within the timeframe specified in the notice. Delays can escalate the situation.

During the Audit

• Be cooperative but measured
• Answer questions honestly and directly
• Don't guess — if you don't know, say so and offer to find out
• Keep copies of everything you submit
• Take notes during meetings

Possible Outcomes

1. No change: Your return is accepted as filed
2. Reassessment: The CRA adjusts your return (could result in additional tax, interest, or penalties)
3. Refund: In rare cases, the audit may reveal you overpaid

Your Rights

If you disagree with a reassessment, you have options:

• File a Notice of Objection within 90 days
• Request a review by the Appeals Division
• Take your case to the Tax Court of Canada

The best defense against a CRA audit is proactive preparation. Keep clean records year-round, work with a qualified CPA, and file accurately. If you do receive an audit notice, contact MyTax immediately — we've successfully represented hundreds of clients through the audit process.