Respond to CRA Audit Letters on Time

CRA audit letters give you 30 days to respond with requested documents. Missing this CRA audit deadline does not make the audit go away — the auditor proceeds with the information they have and reassesses based on assumptions unfavorable to you. Responding on time through proper CRA audit support preserves your right to present your full case.

Never Over-Disclose to CRA

During a CRA audit, provide exactly what the auditor requests — nothing more. Voluntarily submitting extra bank statements, emails, or internal records during CRA audit support opens new lines of inquiry the auditor was not pursuing. A CPA reviewing each CRA audit request ensures only relevant, necessary documentation is submitted to protect your position.

Reconstruct Missing Receipts

If you lack receipts for expenses claimed on your T2 return, your CRA audit support should include reconstruction from bank statements, credit card records, and supplier confirmations. CRA can deny deductions entirely without supporting documents — but reconstructed records prepared by your CPA during CRA audit representation are accepted as alternative proof in most cases.

Defend Contractor Classifications

CRA audits frequently target businesses that issue T4A slips to contractors instead of T4 slips as employees. If the auditor reclassifies your contractors as employees during a CRA audit, you owe unremitted CPP, EI, and penalties dating back years. Proper CRA audit support presents control-test documentation and engagement agreements that defend your T4A treatment.

Challenge Unreported Income Assessments

When a CRA audit adds unreported income based on bank deposit analysis, every unexplained deposit is treated as taxable revenue. Your CRA audit support must reconcile each deposit — loan proceeds, shareholder contributions, inter-account transfers — against the auditor's assessment. Without this reconciliation, CRA applies gross negligence penalties under ITA subsection 163(2) on top of the reassessed tax.

Protect Your CCA Deductions

CRA auditors often reclassify capital cost allowance pools on Schedule 8, moving assets from higher-rate CCA classes to lower ones. Your CRA audit support should include purchase invoices and asset descriptions proving each item belongs in the claimed class. Defending your CCA classification during a CRA audit recovers thousands in depreciation deductions the auditor would otherwise deny.

Request Penalty Relief After Audit

If your CRA audit results in a reassessment with penalties, submit Form RC4288 requesting Taxpayer Relief. When CRA audit penalties resulted from a previous accountant's errors, illness, or circumstances beyond your control, a properly documented RC4288 submitted through your CRA audit representation can eliminate penalties entirely — saving 5% to 50% of the reassessed tax amount.

Separate HST Audit from Income Tax

CRA may audit your GST/HST and corporate income tax simultaneously, but the legal frameworks differ. Your CRA audit support should address each audit independently — HST under the Excise Tax Act and income tax under the ITA. Responding to both CRA audits with separate, targeted documentation prevents one weak area from contaminating the other.

Negotiate Before Reassessment Issues

Once the CRA auditor completes their review, they issue a proposal letter before the formal reassessment. This is your best opportunity during CRA audit support to negotiate — presenting additional evidence, correcting misunderstandings, and reducing proposed adjustments. After the reassessment is issued, your only recourse is a formal CRA objection, which takes 12 to 18 months to resolve.

Stop Interest from the Audit Date

CRA charges compound daily interest on any additional tax assessed from a CRA audit, calculated from the original filing due date — not the audit date. A successful CRA audit defence that reduces the reassessment by even 30% eliminates interest on that portion retroactively. On a $40,000 reassessment, two years of avoided interest through CRA audit support saves over $5,000.