What to Do When You Get a CRA Audit or Review Letter

A letter from the Canada Revenue Agency with the word “audit” or “review” in it can mean anything from a request for one receipt to a full audit of your business records. Most contacts are routine compliance reviews, not criminal investigations, and most correspondence reviews are resolved without significant changes to the return. What type of review you are dealing with decides how you respond. This page walks through the steps; it is part of the Dealing with the CRA directory.

Step 1: Identify what type of review you received

Review letter (matching review). A letter asking you to confirm information you already filed, for example: “We are reviewing the charitable donation you claimed on line 34900. Please send supporting receipts.” The CRA is verifying a specific item, usually because it exceeds a statistical threshold or does not match data from a third party (such as a T4 slip). Most review letters close in your favour if you have the receipts.

Desk audit. A more formal examination of your return, conducted entirely by mail or secure document upload. The CRA may examine multiple items and may propose to reassess your return, often for self-employment income, rental income, or business losses.

Field audit. A CRA auditor visits your home or business. This is reserved for complex files: typically businesses, significant self-employment income, tax shelters, or situations where the CRA needs to physically review books and records. Many people have a tax professional involved before the auditor arrives.

The letter will state which tax year(s) are under review, which line(s) or claim(s) are at issue, and what documents you need to provide. A non-response is treated as an implicit concession: the CRA will issue a reassessment based on what it has.

What tends to put a return in front of a reviewer in the first place is covered in CRA audit triggers.

Step 2: Note your deadline and request an extension if needed

CRA correspondence typically gives you 30 days to respond, though the actual deadline is stated in the letter.

Extensions are routinely granted if you request them before the deadline and explain the reason (documents need to be obtained from a third party, your accountant needs time, documents are from prior years and need retrieval). Calling the number on the letter and getting the extension confirmed in writing (email or CRA correspondence) leaves a record.

Step 3: Gather your documentation

Organize what you need before responding. CRA expects original documents or clear copies.

For employment expense claims (T2200)

For business income

For rental income

For charitable donations

For capital gains

Step 4: Organize and prepare your response

For anything beyond mailing in receipts, a brief cover letter summarizing what you are providing, referencing the CRA letter you are responding to, and giving your SIN or business number helps the reviewer match the documents to the file. Auditors process hundreds of files, so clear organization works in your favour.

When professional help comes in

Step 5: Understand what CRA can and cannot do

How far back the CRA can reassess a return, and what it can change, is covered in why the CRA reassessed your taxes.

Your rights during an audit

• Right to representation: You can authorize a tax professional to deal with the CRA on your behalf (using Form AUT-01, which replaced the discontinued Form T1013, or through My Account under “Authorize or manage representatives”; see the My Account guide)
• Right to request delays: You can request reasonable extensions for document submission
• Right to a proposal letter: Before the CRA finalizes any reassessment, it must send a proposal letter explaining the proposed changes and giving you an opportunity to respond
• Right to object: If the CRA reassesses your return and you disagree, you can file a Notice of Objection
• Right to be treated professionally: If an auditor is acting unreasonably, you can escalate to the auditor’s supervisor or contact the CRA Taxpayer Rights Service

Step 6: If the CRA proposes a reassessment

Before finalizing any change to your return, the CRA sends a proposal letter (sometimes called a “proposed adjustment letter”) explaining:

• What they intend to change
• Why
• The resulting change in tax, interest, and penalties

You have 30 days to respond to the proposal with additional information or arguments. This is the last chance to provide evidence before the CRA issues a formal Notice of Reassessment (NOR).

If the audit reveals income you failed to report, the CRA will:

1. Reassess your return to include the income
2. Charge arrears interest from the original due date
3. Apply a gross negligence penalty (50% of the tax owing on the unreported amount) if the omission is considered wilful or careless
4. In serious cases, refer the file to the Criminal Investigations Division

Step 7: If you disagree with the result

A Notice of Reassessment you believe is wrong can be disputed with a Notice of Objection (Form T400A), filed within 90 days of the reassessment date, and after that at the Tax Court of Canada. The deadlines, the informal and general Tax Court procedures and a sample objection letter are on the guide to disputing a CRA assessment.

Interest continues to accrue on unpaid amounts during a dispute, and if you win, the CRA refunds the tax plus interest. Paying the disputed amount or setting up a payment arrangement in the meantime is how many people limit that interest.

Other unreported years

If you have unreported income or unfiled returns from other years, separate from what the CRA is auditing, the Voluntary Disclosures Program (VDP) may still be available for those issues, though not for the specific issue being audited. When an application counts as unprompted or prompted, and the relief each gets, is covered in the CRA voluntary disclosure guide.

Related CRA guides

• What the CRA does with an unpaid reassessment: interest and the collections timeline
• Checking whether you owe the CRA: where a reassessed balance shows up