CRA Tax Audits: What to Expect and How to Respond

A CRA audit is a check of whether your returns match your records and the law. It is not an accusation, and many audits are resolved through an ordinary exchange of documents and explanations. How you respond still matters: what you provide, what you say and whether you meet the dates in the CRA's letters can affect both the result and how long the process takes.

This guide covers income tax and GST/HST audits of individuals and businesses. It explains the process; it does not replace advice on your situation.

What a CRA audit is

In an audit, a CRA auditor examines your books, records and supporting documents to confirm that income, deductions, credits and tax were reported correctly. The CRA selectively audits tax returns and claims for rebates as part of its regular activities (CRA, RC4188), and describes audits as an important part of keeping the tax system fair for everyone (CRA, What you should know about audits).

The auditor will contact you to start the process and tell you when and where the audit will take place, and can explain how to send documents online through the CRA's secure services (CRA, What you should know about audits).

Reviews, information requests and audits are not the same

The word "audit" gets used for almost any CRA letter. The differences matter, because each calls for a different level of response.

Hypothetical example. A self-employed designer receives a letter asking for receipts supporting home-office expenses claimed two years ago. That is a request to support specific claims, not a full audit. Sending organized, complete support may be enough to resolve it. This example is for illustration only; the right response depends on your facts and on what the letter actually says.

How the CRA selects files

The CRA says it uses a risk assessment to decide which files to audit. It looks at information it already holds about the taxpayer, and it may compare that information with similar files or draw on information from other audits or investigations (CRA, What you should know about audits).

The CRA does not set out a complete list of what it treats as risk, so treat any published list of "audit triggers" as general guidance rather than a rulebook. Being selected is not, on its own, a finding that anything is wrong.

How an audit usually unfolds

Every audit is different, but most follow a recognizable sequence (CRA, What you should know about audits):

1. First contact. An auditor contacts you by mail, phone or both to start the audit and explains the arrangements.
2. Records and questions. You, or your representative, provide the records requested and answer questions. In a business audit, the auditor may also ask the employees who make your accounting entries about your operations.
3. Examination. The auditor reviews the records, may ask follow-up questions and may consult other CRA tax specialists.
4. Proposal. If the auditor intends to make changes, they explain them and give you an opportunity to respond, which the CRA's guidance puts at 30 days. The CRA encourages you to raise any disagreement at this stage, and the auditor is expected to consider your explanations and answer your questions about the proposal.
5. Result. The audit ends with no change or with a reassessment. If you disagree with a reassessment, you have the right to object. See objection deadlines.

How long this takes depends on the scope of the audit, the volume of records, how quickly information moves in both directions and whether specialists become involved. There is no fixed timetable, so treat any general estimate with caution.

How far back the CRA can go

Two different questions often get blended together: which years an audit looks at, and how long the CRA has to change your tax for a given year. The second, the reassessment period, is the legal limit that matters.

Income tax

The normal reassessment period runs from the date of the original notice of assessment (or the original notification that no tax is payable) for the year (Income Tax Act, s. 152(3.1)):

The CRA can go beyond the normal period in specific circumstances set out in section 152(4), including:

• No time limit where the taxpayer, or the person who filed the return, made a misrepresentation attributable to neglect, carelessness or wilful default, or committed fraud. The reassessment is limited to what can reasonably be regarded as relating to that misrepresentation or fraud.
• Waivers. If you sign a waiver within the normal period, the CRA can reassess the matters it covers. A waiver can be revoked on six months' notice.
• An extra three years for certain matters, including transactions with non-residents with whom the taxpayer does not deal at arm's length, and cases where required foreign property reporting was not filed and related income was not reported.
• Other special rules, for example for unreported dispositions of real property and for certain reportable and notifiable transactions that were not disclosed as required.

GST/HST

For GST/HST, an assessment of net tax for a reporting period generally cannot be made more than four years after the later of the return's due date and the day it was filed. That limit does not apply where there was a misrepresentation attributable to neglect, carelessness or wilful default, fraud, or a waiver in effect (Excise Tax Act, s. 298).

Read any waiver request carefully. A waiver extends the time the CRA has to reassess. If one is requested, consider whether to sign it and, if so, whether it should be limited to the specific issues under review.

Proposed changes before Parliament

Bill C-31, the Budget 2025 Implementation Act, No. 2, would give the CRA new powers in audits, including a notice of non-compliance for unmet information requests. As described in the Library of Parliament's summary, a person who receives one would be liable to a penalty of $50 for each day it is outstanding, up to $25,000, and time spent on a review or judicial review of the notice would not count toward the normal reassessment period (Library of Parliament, Legislative Summary). As of October 22, 2026, the bill was still at the committee stage in the House of Commons and was not law (LEGISinfo).

Documents and records

Businesses and self-employed individuals are generally required to keep their books and records for six years from the end of the last tax year they relate to, with some exceptions that can require longer (CRA, Where to keep your records, for how long). In an audit, the auditor will usually ask for some combination of:

• sales and income records, invoices issued and deposit records
• purchase invoices and receipts for expenses claimed
• bank, credit card and loan statements
• the general ledger, financial statements and accountant's working papers
• payroll records, if you have employees
• GST/HST returns and the records supporting tax collected and input tax credits claimed
• contracts, leases and records of significant transactions
• records of amounts taken from, or put into, a corporation by its shareholders

If you no longer have certain records, the CRA expects you to try to obtain copies, for example from your bank or suppliers (CRA, What you should know about audits). The CRA is not bound by your return and can assess on another basis where records are missing or unreliable (Income Tax Act, s. 152(7)), which is why a careful reconstruction is usually better than leaving gaps.

Never alter, backdate or destroy records, or create documents after the fact. Doing so can turn a civil disagreement into an offence (Income Tax Act, s. 239(1)(b)–(c)). If a record is missing, say so and explain how you have reconstructed the figures.

Communicating with the CRA during an audit

• You can be represented. The Taxpayer Bill of Rights includes the right to be represented by a person of your choice (Office of the Taxpayers' Ombudsperson). The CRA can only discuss your information with you or your authorized representative (CRA, IC00-1R7), so a representative generally needs to be authorized through the CRA's process first (CRA, Authorize a representative).
• Keep a record. Note every call and meeting, keep copies of everything you send, and confirm requests in writing.
• Meet the dates. If you need more time, ask in writing before the date passes.
• Answer what is asked, accurately. If you do not know an answer, say so and follow up. Do not guess, and do not offer explanations you are unsure of.
• Ask for the basis of any proposed change. You are entitled to understand what the auditor is proposing and why, and to respond before a reassessment is issued.
• Watch for a change in direction. If questions turn to what you knew or intended, or someone from the CRA's criminal investigations area becomes involved, get legal advice promptly. See audit or criminal investigation?.

If you are not satisfied with the service you receive, you have the right to file a service complaint (CRA, What you should know about audits).

GST/HST audits

GST/HST is governed by the Excise Tax Act, not the Income Tax Act, and several rules differ:

• Assessment period. Generally four years, with the exceptions described above.
• Common focus. Whether tax was charged, collected and remitted correctly, and whether input tax credits claimed are supported by adequate documentation.
• Collection during a dispute. Unlike most disputed income tax, GST/HST amounts are generally not protected from collection while an objection or appeal is under way (CRA, File an appeal to the Court).
• Quebec. For most businesses located in Quebec, Revenu Québec administers the GST/HST, including audits and objections (Revenu Québec).

Possible outcomes

An audit can end in several ways:

• No change. The CRA accepts the return as filed.
• Adjustments. The CRA reassesses, usually with additional tax and interest on the unpaid amount.
• Penalties. Depending on the facts, these can include a penalty for repeatedly failing to report income, or a gross negligence penalty where a false statement or omission was made knowingly or in circumstances amounting to gross negligence. For income tax, that penalty is the greater of $100 and 50% of the related understatement of tax (Income Tax Act, s. 163); for GST/HST, it is the greater of $250 and 25% of the related amount (Excise Tax Act, s. 285).

If you disagree with a reassessment, the disputes guide sets out the objection deadlines and process.

When professional help may make a difference

Many audits are handled well by an accountant who knows your books. It is worth involving a lawyer, alone or alongside your accountant, when:

• the audit concerns income that was not reported, or the CRA raises gross negligence penalties
• questions turn to intent, or there are signs of a criminal investigation
• you receive a formal requirement, or there is disagreement about what must be produced
• privilege may matter, for example where you need advice about your exposure before deciding how to respond
• you are also considering a voluntary disclosure for other years or issues
• the amounts are significant or the issue turns on how the law should be interpreted

The disputes guide explains how lawyers and accountants divide the work, and what solicitor-client privilege does and does not protect.

Return to the Taxpayer Resource Centre.

Facing a CRA audit?

We act for individuals and owner-managed businesses in Ontario during CRA audits, from the first letter to the response to a proposal. See our Tax Defence services or request a confidential consultation.