The short version
- A CRA audit is a detailed examination of your books and records, usually for a business, a rental or a large claim. It's different from a review letter asking for a few receipts.
- CRA picks files mainly by risk: indications of errors or non-compliance, comparisons with similar businesses, third-party information and leads, plus some random selection.
- CRA's standard timelines give you up to 30 days for the first request for records and 15 to 60 days for follow-up requests, and 30 days to respond to the proposal letter at the end.
- CRA can normally reassess within three years of your original notice of assessment (four for most corporations other than CCPCs). There's no limit where it can show carelessness, neglect, wilful default or fraud.
- You can have an accountant or lawyer deal with CRA for you, and you can object to any reassessment that comes out of the audit.
CRA Audit: What Happens and How to Respond
The letter usually starts politely: "Your file has been selected for audit." Nobody in the history of Canada has read that sentence and relaxed. Most audits are dull, document-heavy and end with small adjustments or none. The ones that go badly usually go badly because of missing records, late responses, or an owner who explained too much and documented too little. Here's how the process works and how to keep it boring.
Review or Audit?
| Review | Audit | |
|---|---|---|
| Typical trigger | A specific claim: medical expenses, tuition, moving costs, a credit | Business, rental or self-employment income, GST/HST, payroll, large or unusual items |
| Contact | A letter asking for receipts by a date | A letter or call from an auditor, then a request for books and records |
| Scope | One or two lines on one return | Can cover several years and several taxes |
| Where | By mail or online | At your business, your accountant's office, or a CRA office, or by correspondence |
| Page to read | CRA review letter | This page |
How CRA Picks Files
CRA says it selects files mainly through risk assessment: the likelihood of errors or signs of non-compliance. In practice that means things like:
- Business losses year after year, or a loss against a high-income job; see hobby vs business.
- Income that looks low for the industry or the lifestyle.
- Slips that don't match the return: T4As, T5018s for contractors, platform reports for online sellers and short-term rentals.
- Cash-heavy industries, and industries in a current CRA project (construction, trucking and real estate have all had them).
- GST/HST refund claims, especially large or first ones.
- Leads from other audits, informants and other government data.
Some files are picked at random to measure compliance. Being selected is not an accusation.
Got an audit letter?
Upload it. The Document Analyzer reads what CRA is asking for, which years and taxes are in scope, and the deadline, and lists the records to pull together first.
The Audit, Step by Step
- Contact. The auditor sends a letter or calls to confirm the years, the taxes and a first list of records. Ask for anything verbal to be confirmed in writing.
- Records request. Typically general ledger, bank and credit card statements, sales invoices, expense receipts, vehicle logs, contracts and loan documents. CRA's standard is up to 30 days for this first request.
- Examination. The auditor tests income (often by comparing bank deposits to reported sales) and expenses, and may interview you. Follow-up requests usually get 15 days for things you have on hand, 30 days for things you don't, and up to 60 in special cases.
- Proposal letter. The auditor sends proposed adjustments with the reasons and calculations. You get 30 days to agree, disagree or send more information. This is the cheapest point in the whole process to fix a mistake.
- Reassessment. CRA issues a notice of reassessment, or a letter saying no changes. See notice of reassessment.
- Objection. If you still disagree, file a notice of objection; see CRA objection.
If you don't provide records, CRA can issue a formal requirement for information and then ask a court for a compliance order. It can also estimate your income with a net worth assessment, which compares what you own and spend with what you reported. Records beat estimates every time.
Your Rights During an Audit
- A representative. Authorize an accountant or lawyer through My Account or Represent a Client, and they can deal with the auditor.
- Reasonable time. Ask for more time before a deadline passes, in writing, with a reason.
- Information. You can ask what CRA is reviewing, why, and to see the working papers behind a proposed adjustment.
- The Taxpayer Bill of Rights. 16 rights, including courteous treatment, complete and accurate information, and the right to complain about service.
- Privacy of your information, though CRA can ask third parties such as banks for records.
How Far Back CRA Can Go
| Situation | Normal limit |
|---|---|
| Individuals, trusts, CCPCs | 3 years from the date of the original notice of assessment |
| Other corporations | 4 years (longer for some items) |
| Misrepresentation through neglect, carelessness, wilful default or fraud | No limit, for the item involved |
| You signed a waiver (form T2029) | The waived items stay open until you revoke it, plus six months |
Records must generally be kept six years from the end of the year they relate to; see how long to keep tax records and, for businesses, recordkeeping requirements.
Penalties an Audit Can Bring
- Interest on any extra tax, from the original due date, at the prescribed rate (7% for October to December 2026), compounded daily.
- Repeated failure to report income: up to 10% of the unreported amount, in the cases the rule covers.
- Gross negligence: 50% of the tax on a false statement made knowingly or with gross negligence. This is the penalty worth fighting hardest.
Rules That Keep Audits Short
- Answer by the deadline, or ask for more time before it.
- Send what's asked, organized and labelled, not a shoebox and not your whole life.
- Answer questions accurately and briefly. Don't guess; say you'll check.
- Keep copies of everything you send, and a log of every call.
- Get help early if the amounts are large or penalties are proposed. Advice is cheapest before the reassessment.
Everything else about dealing with CRA is on the CRA guide.
CRA Audit Questions
How does CRA choose who to audit?
Mainly by risk assessment: signs of errors or non-compliance, comparisons with similar taxpayers, third-party information and leads. Some files are selected at random.
How far back can a CRA audit go?
Normally three years from the date of the original notice of assessment for individuals and Canadian-controlled private corporations, and four years for most other corporations. There is no limit where CRA can show misrepresentation through carelessness, neglect, wilful default or fraud.
How long do I have to give CRA my records?
CRA’s standard is up to 30 days for the first request for books and records, and 15 to 60 days for follow-up requests depending on how available the information is. You can ask for more time before the deadline.
What is a proposal letter?
A letter at the end of an audit setting out the changes CRA plans to make and why. You usually have 30 days to respond before CRA reassesses.
Can I object after an audit?
Yes. If you disagree with the reassessment, you can file a notice of objection by the deadline: 90 days after the notice for corporations and GST/HST, and for individuals the later of 90 days after the notice and one year after the return’s filing due date.
Sources: CRA, RC4188 What you should know about audits; Standard timelines for information requests (AD-20-01); Prescribed interest rates, Q4 2026. Checked October 2026. The selection examples are typical factors, not CRA's published criteria. The reassessment periods, waiver rule and penalties are summarized from the Income Tax Act (sections 152, 162 and 163) as we understand them.
Last reviewed October 5, 2026 against CRA and Government of Canada sources. How we check our facts.