Act Within the CRA Audit Timeline

When CRA issues an audit notification, you typically have 30 days to respond with requested documentation. Ignoring or delaying your CRA audit resolution response does not pause the process — the auditor proceeds with available information and issues a reassessment based on assumptions that almost always increase your tax owing plus penalties and interest.

Organize Records by CRA Request

Your CRA audit resolution starts with matching every document to the specific line items the auditor questioned. Organize bank statements, invoices, and receipts by tax year and schedule — T2 Schedule 1 expenses, Schedule 8 CCA claims, and GST/HST ITCs. A well-organized CRA audit response package reduces auditor follow-ups and speeds resolution.

Limit Disclosure to What Is Asked

During CRA audit resolution, submit only the documents the auditor specifically requested. Providing extra bank accounts, internal memos, or unrelated financials opens new audit lines the CRA was not pursuing. Your CPA reviews each CRA audit information request and responds with precisely the required evidence — nothing more, nothing less.

Defend Expense Deductions with Proof

CRA auditors deny corporate deductions when supporting documentation is missing or insufficient. Your CRA audit resolution must include contracts, invoices, and proof of payment for every challenged expense — meals under ITA section 67.1, vehicle under section 67.3, home office under section 18(12). Each defended deduction saves tax at your corporation's marginal rate.

Reconcile Bank Deposits Against Revenue

CRA audit resolution on unreported income cases requires a full bank deposit reconciliation. Every deposit the auditor cannot explain — loan proceeds, shareholder contributions, inter-account transfers — gets assessed as taxable revenue. Your CPA reconciles each deposit during CRA audit resolution to eliminate false income additions and avoid gross negligence penalties under ITA subsection 163(2).

Protect CCA Classifications on Schedule 8

CRA auditors frequently reclassify assets to lower CCA rate classes during an audit — moving equipment from Class 50 at 55% to Class 8 at 20%. Your CRA audit resolution should present purchase invoices and asset descriptions proving each item belongs in the originally claimed class, recovering years of depreciation deductions the auditor would otherwise deny.

Negotiate at the Proposal Letter Stage

Before CRA issues a formal reassessment, the auditor sends a proposal letter outlining adjustments. This is the most cost-effective point in your CRA audit resolution to negotiate — presenting additional evidence, correcting auditor misunderstandings, and reducing proposed amounts. After reassessment, your only option is a formal objection that takes 12 to 18 months.

Apply for Penalty Cancellation

If your CRA audit resolution results in penalties — late filing at 5% plus 1% per month, or gross negligence at 50% of understated tax — submit Form RC4288 requesting Taxpayer Relief. When CRA audit penalties arose from a prior accountant's errors or extraordinary circumstances, a documented RC4288 can eliminate penalties entirely from your reassessment.

Address HST and Income Tax Separately

When CRA audits both your corporate income tax and GST/HST simultaneously, your CRA audit resolution must treat each as a separate case. The legal tests differ — ITA for income tax, Excise Tax Act for HST — and different auditors may handle each. Separate CRA audit responses prevent a weak position on one from undermining the other.

Implement Post-Audit Compliance Controls

After CRA audit resolution is complete, implement the specific record-keeping and filing procedures the auditor flagged. CRA tracks previously audited corporations and re-audits those that repeat the same issues. Proper post-CRA audit controls — organized receipts, accurate CCA tracking, timely T4 and HST filings — prevent a second audit cycle within three to five years.