Receiving a letter from the Canada Revenue Agency with the word “audit” or “review” in it triggers immediate anxiety for most Canadians. But CRA correspondence ranges from a simple request for one receipt to a full audit of your business records. Understanding what type of review you are dealing with determines how you respond.
Most correspondence reviews are resolved without significant changes to your return. Acting promptly, professionally, and with proper documentation is the key.
Step 1: Identify what type of review you received
Not all CRA letters are equal. Read the letter carefully to identify the type.
| Type | Description | Level |
|---|---|---|
| Matching review / correspondence review | CRA requests documentation to support a specific deduction or income amount | Low |
| Processing review | CRA is verifying information before processing your return or benefit | Low |
| Desk audit | A CRA auditor is reviewing your file in detail; they may contact you by phone or request documents | Medium |
| Field audit | A CRA auditor contacts you to review books, records, and possibly visit your business or home office | High |
| Net worth audit | CRA compares your lifestyle and assets against declared income — often used when records are incomplete | High |
| GST/HST audit | CRA reviewing your business’s HST filings separately from income tax | Medium–High |
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.
Do not ignore the letter. A non-response is treated as an implicit concession. CRA will issue a reassessment based on what it has.
→ See: CRA Audit Triggers Canada
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.
| Action | Timing |
|---|---|
| Read the letter and note the response deadline | Immediately |
| Determine if 30 days is sufficient to gather documents | First 2–3 days |
| Contact the auditor to request an extension if needed | Before the deadline, not after |
| Begin gathering documents | Same week |
Extensions are routinely granted if you request them proactively 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). Call the number on the letter and get the extension in writing (email or CRA correspondence).
Step 3: Gather your documentation
Organize what you need before responding. CRA expects original documents or clear copies.
For employment expense claims (T2200)
| Document | Why CRA Wants It |
|---|---|
| Signed T2200 from employer | Confirms employer required you to work from home or incur expenses |
| Receipts for claimed expenses | Home office expenses, vehicle, tools, supplies |
| Vehicle logbook | Required if claiming vehicle expenses — shows business vs personal use |
| Lease or mortgage statement | To support home office square footage calculation |
For business income
| Document | Why CRA Wants It |
|---|---|
| Books and records | All invoices, receipts, bank statements for the tax year(s) under review |
| Business bank account statements | Reconcile deposits to declared income |
| Expense receipts | Match to deductions claimed |
| GST/HST records | CRA may audit both simultaneously |
For rental income
| Document | Why CRA Wants It |
|---|---|
| Lease agreements | Confirm rental income and tenant |
| Rental income records | Bank statements showing deposits |
| Expense receipts | Repairs, property management, insurance, interest |
| Mortgage statements | To support interest deduction on rental property |
For charitable donations
| Document | Why CRA Wants It |
|---|---|
| Official CRA donation receipts | Must be from a registered Canadian charity with CRA number |
| Bank/credit card statements | To corroborate payment of donation |
→ See: CRA Record Keeping Requirements
Step 4: Organize and prepare your response
Present your response professionally.
| Best Practice | Details |
|---|---|
| Respond only to what was asked | Do not volunteer information or documents beyond the specific request |
| Label every document clearly | Reference the line number or deduction it supports |
| Include a cover letter | State the tax year, your SIN, the CRA reference number, and a brief list of enclosed documents |
| Keep copies of everything you send | Send by registered mail or use a fax with confirmation; get a record |
| Do not send originals by mail | Send clear copies; note you retain originals |
Consider professional help
| Situation | Recommended Action |
|---|---|
| Simple correspondence review (single deduction) | An accountant can respond efficiently |
| Desk audit or field audit | Engage a CPA with audit experience |
| Large amounts (>$10,000 at stake) | CPA and possibly a tax lawyer |
| Allegations of unreported income | Tax lawyer — privilege protects your conversations |
| Fraud investigation | Tax lawyer immediately; do not speak to CRA without counsel |
Step 5: Understand what CRA can and cannot do
| CRA Has the Right To… | CRA Does Not Have the Right To… |
|---|---|
| Request records for a specific tax year | Indefinitely extend an audit without reason |
| Reassess any return within the normal reassessment period (3 years from assessment date; 6 for self-employment with business income) | Access your private communication with a lawyer (solicitor-client privilege) |
| Impose gross negligence penalties (50% of the taxes owed) if you were careless | Enter your home without consent or a court order |
| Assess arrears interest (currently 9%) on amounts owed | Demand information beyond what is legally required |
Limitation periods
| Situation | How Far Back CRA Can Go |
|---|---|
| Regular returns (employees) | 3 years from date of original assessment |
| Self-employment / business income | 3 years (6 years if income was not reported and there was a misrepresentation) |
| Tax evasion / fraud | No statute of limitations |
Step 6: If you disagree with the result — your appeal rights
If CRA issues a Notice of Reassessment that you believe is wrong, you have a structured appeal process.
| Stage | Deadline | Details |
|---|---|---|
| Notice of Objection | 90 days from reassessment date | File Form T400A with CRA’s Appeals Division |
| Tax Court of Canada | 90 days after objection decision (or 90 days after 1-year deadline if no response) | Informal procedure for amounts under $25,000 (no lawyer required); formal procedure for larger amounts |
| Federal Court of Appeal | 30 days after Tax Court decision | Complex legal questions only |
Pay the disputed amount or arrange a payment plan while you dispute. Interest continues to accrue on unpaid amounts during the appeal process. If you win the appeal, CRA refunds the tax plus interest.
CRA Voluntary Disclosures Program
If the audit reveals you have unreported income from prior years that you have not yet been contacted about, the Voluntary Disclosures Program (VDP) allows you to come forward proactively. Benefits include waiver of penalties and potentially reduced interest — but you must apply before CRA contacts you about that specific issue.
→ See: CRA Voluntary Disclosure Program Canada | CRA Reassessment and Appeal