What triggers a CRA audit?

CRA audits are triggered by a combination of statistical risk scoring, random selection, and specific red flags. Common triggers include: self-employment income (especially with high expense claims), rental income, large charitable donations relative to income, repeated business losses, employment expenses claimed on a T2200 that seem disproportionate, or a referral from a related taxpayer already under audit. Being selected for a review letter is often routine and not evidence of wrongdoing.

What is the difference between an audit and a review letter?

A "review letter" (the most common type) simply asks you to confirm information you already reported — mail in your receipts and CRA accepts your return as filed. A desk audit is more formal: CRA may reassess specific items but the process is done by correspondence. A field audit involves a CRA auditor visiting your home or business in person and is reserved for complex files. Most Canadians will only ever receive a review letter.

How long does a CRA audit take?

A review letter you respond to promptly can close in 4–8 weeks. A desk audit typically takes 3–6 months. A field audit can take 6 months to over two years depending on complexity. During the audit, CRA is generally limited to reassessing returns from the previous three years (six years for tax shelters or misrepresentation). CRA must also issue a proposed adjustment letter before finalizing any reassessment, giving you a chance to respond.

Do I need a lawyer or accountant for a CRA audit?

For a simple review letter (mail in your receipts), you can handle it yourself. For a desk audit involving business deductions or significant dollar amounts, hiring a CPA who handles CRA matters is worth the cost. For a field audit or any audit involving potential penalties, large reassessments, or suspected fraud, engage a tax lawyer. Only lawyers have solicitor-client privilege — communications with your accountant are not protected from CRA disclosure.

What happens if I just ignore a CRA audit letter?

Never ignore CRA correspondence. If you do not respond to a review letter, CRA will disallow the claimed deduction and reassess your return — often resulting in a tax bill plus interest. For a more serious audit, failure to respond can lead to arbitrary assessments (CRA estimates your income and reassesses), denial of all deductions claimed, and potential penalties for failure to provide information. Always respond, even if only to request more time.

How to Respond to a CRA Audit in Canada

Receiving a letter from CRA about your tax return can be alarming. But most contacts are routine compliance reviews — not criminal investigations. Here is what each type of CRA contact means, and exactly how to respond.

The three types of CRA contact

1. Review letter (most common)

Also called a matching review, this is 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.”
“We noticed you claimed employment expenses. Please provide a completed T2200 from your employer.”

What it means: 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).

What to do: Gather the requested documents and respond by the deadline shown (usually 30 days). Most review letters close in your favour if you have the receipts.

2. Desk audit

A desk audit is a more formal examination of your return, conducted entirely by mail or secure document upload. CRA may examine multiple items and may propose to reassess (change) your tax return.

What it means: CRA has questions about your return that go beyond a single item — often for self-employment income, rental income, or business losses.

What to do:

Read the letter carefully — it will list exactly what CRA is examining
Respond with all requested documentation within 30 days
You are entitled to ask for a 30-day extension if you need more time to gather records — call the number on the letter and ask

3. Field audit

A field audit involves a CRA auditor visiting your home or business. This is reserved for complex files — typically businesses, significant self-employment income, tax shelters, or situations where CRA needs to physically review books and records.

What it means: CRA has identified significant audit issues and requires an in-person review.

What to do: Contact a tax professional before the auditor arrives. Do not allow the audit to proceed without professional representation if possible.

Your rights during an audit

You have important rights during any CRA audit:

Right to representation: You can authorize a tax professional to deal with CRA on your behalf (using Form T1013 or through My Account → “Authorize or manage representatives”)
Right to request delays: You can request reasonable extensions for document submission
Right to a proposal letter: Before CRA finalizes any reassessment, they must send a proposal letter explaining the proposed changes and giving you an opportunity to respond
Right to appeal: If CRA reassesses your return and you disagree, you have the right to file a Notice of Objection (see our How to Appeal a CRA Decision guide)
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

What to gather for a CRA audit

The documents CRA typically wants depend on the issue, but generally include:

For employment expenses (T2200):

Signed T2200 from employer
Receipts for each claimed expense
Home office area calculation (if claiming home office)

For self-employment income:

Bank statements for all business accounts
Invoices issued and received
Receipts for all deducted expenses
Vehicle logbook (if claiming vehicle expenses)
Lease agreements, contracts, client records

For rental income:

Lease agreements
Bank statements showing rental deposits
All expense receipts (maintenance, insurance, property tax)
Mortgage statements showing interest paid

For charitable donations:

Official donation tax receipts (must show CRA registration number)
Bank or credit card statements corroborating the payments

For capital gains:

Trade confirmations showing purchase price and sale price
ACB (adjusted cost base) calculations
Dividend reinvestment plan records if applicable

How to respond to an audit

Step 1: Read the letter carefully

Note:

Exactly what CRA is asking for
The response deadline
The name and direct phone number of the auditor or reviewer

Step 2: Gather documents

Collect everything responsive to the request. Organize it clearly — auditors process hundreds of files; clear organization works in your favour.

Step 3: Write a cover letter

For anything beyond mailing in receipts, include a brief cover letter summarizing what you are providing, referencing the CRA letter you are responding to, and your SIN or business number.

Step 4: Submit by the deadline (or request an extension)

If you need more time, call the number in the letter. CRA generally grants one 30-day extension without issue. Be proactive — do not miss a deadline without calling.

Step 5: Keep copies of everything

Keep a copy of every document you send to CRA and make note of when you sent it. If CRA later claims not to have received something, you need evidence of what was submitted.

If CRA proposes a reassessment

Before finalizing any change to your return, CRA will send 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 your last chance to provide evidence before CRA issues a formal Notice of Reassessment (NOR).

If you disagree with the NOR after it is issued, you have 90 days to file a Notice of Objection. See our How to Appeal a CRA Decision guide.

What if CRA finds unreported income you did not disclose?

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

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

If you realize during an audit that there is related unfiled income or returns separate from what CRA is auditing, talk to a tax lawyer before volunteering anything — the VDP is no longer available for the specific issue being audited, but may still be available for other issues.

How to Appeal a CRA Decision — If you disagree with the audit result
CRA Voluntary Disclosures Guide — If you have unreported issues beyond what CRA found
CRA Collections Explained — What happens once a reassessment is issued
How to Use CRA My Account — Authorize a representative and manage your file online