Have you ever opened your mailbox to find a letter from the Canada Revenue Agency (CRA), only to feel your stomach drop? You’re not alone.
Whether you’re salaried, self-employed, or running a multinational corporation, the CRA conducts routine audits and financial reviews each year to ensure all Canadians are abiding by the latest tax rules.
Being selected for an audit does not imply any wrongdoing on your part. But how you handle it, from the first moment you open that envelope, can affect your outcome and peace of mind.
Keep reading this blog post to see what a CRA audit really is, why you might have been selected, what to do next, and how the CRA audit appeals process works if you disagree with their assessment.
What Is a CRA Audit and Why Did I Get a Letter?
A CRA audit is a formal review of your tax filings and financial records with the objective to ensure the accuracy and completeness of the information you’ve submitted on your return.
CRA audits are often triggered by data discrepancies (outliers), large deductions, or industry trends. A review is a lighter touch, typically resolved by sending in requested documents. An audit, however, involves deeper scrutiny.
So, why were you selected? Here are the most common CRA audit triggers:
- Claiming unusually high business or home-office expenses
- Reporting rental or self-employment income without documentation
- Large charitable donations compared to income
- Frequent edits to tax filings
- Third-party tips or mismatched T4/T5 slips
Sometimes, you can get selected simply for being part of a high-risk industry like construction, restaurants, or real estate. Other times, your file may be part of a targeted audit sweep. This year, CRA has emphasized audits related to:
| Audit Focus Area | Key Risks/Targets |
| Real Estate | Flipping, principal residence misuse, unreported gains, GST/HST on new homes |
| Cash-Based Businesses | Underreported income, tax evasion |
| Platform Economy | Unreported rental or gig income |
| Aggressive Tax Planning | Shell companies, inflated expenses, tax shelters |
| GST/HST Refund Fraud | Unwarranted claims, improper rebates |
| Foreign/Crypto Transactions | Unreported assets, capital gains/losses |
Need help figuring out what triggered your audit?
Reach out to Nasaijit’s personal tax support team.
What to Do After Receiving a CRA Audit Letter
Let’s break it down. You’ve received a CRA audit letter. Now what?
First, read it carefully. You should be able to see:
- What year(s) of your return are under audit
- What documents the CRA wants
- When and how to respond
- Who your assigned CRA agent is
Next, don’t wait. You usually have 30 days to respond. If you need more time, communicate with them as soon as possible. Delays without notice can escalate matters and damage your case.
Here’s a quick CRA audit checklist of common documents they may request:
- Your full tax return(s) for the year in question
- Bank and credit card statements
- Employment slips (T4, T5, etc.)
- Receipts for expenses or deductions
- Business records (invoices, payroll, logs)
- Rental income documentation
- Donation receipts
- Vehicle and home-office logs
You should keep all communication clear and organized, and only send copies, never originals. If you’re unsure whether something is required, or how to interpret the request, it’s better to get in touch with them as soon as possible.
Can the CRA review your bank account activity?
Yes, in some cases, especially if they suspect unreported income or inconsistent cash flow. While they don’t monitor every account, the do have the authority to investigate when something flags their attention.
Need help preparing your documents? Let Nasaijit’s accounting support team handle the process and ensure compliance.
The CRA Audit Appeal Process
What if you’ve done everything right and still disagree with the CRA’s final decision during the CRA audit appeal process?
You don’t have to accept it. The CRA audit appeal process is a structured, multi-stage pathway designed to protect taxpayer rights. It starts with filing a formal Notice of Objection.
Step 1: File a Notice of Objection
- Deadline: Within 90 days of the CRA’s notice of assessment or reassessment
- Use CRA Form T400A
- Clearly state what you disagree with and why
- Provide supporting documents or explanations
Once filed, your objection goes to the CRA’s Appeals Division, a separate branch that re-evaluates your case independently.
Step 2: CRA Appeals Review
- This can take several months depending on complexity
- The officer may request further clarification or evidence
- If your objection is successful, the assessment may be revised
Step 3: Take it to the Tax Court of Canada (if unresolved)
- If CRA denies your objection and you still disagree, you can appeal to Tax Court
- We strongly recommend hiring a tax lawyer at this point to represent your case.
- Most tax disputes are resolved before reaching this stage
Want to avoid delays or missteps?
Consult Nasaijit’s team to help file your objection properly and on time.
How to Use MyCRA to Monitor Your Audit Status
If you haven’t already, set up your MyCRA account by following these CRA registration instructions.
With MyCRA, you can:
- View audit or review notices
- Track correspondence and document requests
- Upload files directly
- View your Notice of Assessment or Reassessment
It’s a secure and efficient way to stay on top of your audit or appeal.
Stay Informed, Stay Prepared During a CRA Audit- Get in Touch!
CRA audits are manageable if you take the right steps early. Know your rights, respond clearly, and don’t be afraid to appeal. When in doubt, it pays to consult a reputable tax accountant.
Talk to a Nasaijit tax advisor today
Related Reads:
A Comprehensive Guide to Personal Income Tax Preparation in Nunavut
What Tax Credits Are Available for Indigenous-Owned Businesses in Nunavut?