I get asked all the time: "What do I do if I get audited by CRA?"
Some people think there’s a secret formula to avoid being picked but the truth is it’s not that simple.
If you’re self-employed, own rental property, run a business, or claim complex deductions, the odds are higher than you think. But here’s the key: CRA expects accuracy, honesty, effort, and crystal clear documentation.
In 2024 alone, I saw several people audited for things they thought “didn’t matter.” CRA asked for every receipt... even $30 ones from five years ago. And that’s not an exaggeration.
CRA doesn’t publish its selection formula, but based on years of helping people through audits, here are some common red flags:
If your return doesn’t line up with what CRA sees from employers, banks, or third-party slips it's a guarantee that they will notice. And yes, AI is definitely used by the CRA more often to detect these mismatches.
CRA will usually start with a letter or phone call. The auditor may ask for:
They’ll review the years in question, and they can go back six years, sometimes more in cases of suspected fraud.
CRA confirms this here:
Here’s what I tell my clients:
Audits are stressful, but they’re manageable. CRA isn’t trying to ruin your life... they just want make sure you're compliant and keep all your supporting documentation.
If CRA gives you a deadline, meet it. If you can’t, request an extension. Ignoring them makes things worse.
Amending a return in the middle of an audit without telling the auditor can raise red flags. Talk to your accountant first.
Even small receipts count. CRA has asked for proof of $20 parking expenses. If you can’t find something, tell the auditor up front.
If you don’t have a receipt, don’t invent one. CRA takes that seriously, and it can lead to penalties or worse.
A big misconception is that CRA “already knows” your income because of the T-slips.
That’s not true if:
In 2024, I handled several cases where CRA missed T5 slips, TFSA penalty notices, or failed to apply credits. Bottom line: don’t assume CRA will catch your mistakes...or protect you from them.
One client came to me with over $8,000 in TFSA penalties. Why? He relied on CRA’s online TFSA balance, didn’t track his own contributions, and over-contributed three years in a row. The CRA didn’t notify him until it was too late.
That’s just one example. Audit defense starts long before the audit...it’s about recordkeeping, understanding what you’re reporting, and being proactive.
If you’ve been selected for a CRA audit... or even if you’re just nervous about your file, it helps to work with someone who’s been through it before. I’ve represented clients at all levels of CRA: from basic reviews to complex Appeals Branch cases.
Ottawa has a large number of consultants, contractors, and self-employed professionals. CRA knows this, and they do focus audits here regularly.
If you're reading this because you just got an audit letter, or a "request for more information," don't ignore it. Reach out.
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This is not legally binding tax advice. This is educational analysis. Say hello if you need help.
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Disclaimer
The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without a specific consultation. Lucas CPA Professional Corporation will not be held liable for any problems that arise from the usage of the information provided on this page.