The CRA selects returns for review through a combination of risk-based algorithms, random selection and information matching. Being selected for a review does not mean you have done anything wrong — but how you respond determines whether it ends quickly and favourably or drags on for months. LevelTax handles CRA correspondence and audit representation for our clients as a standard part of our service, and this guide explains the full process from initial contact to resolution.
Types of CRA reviews and audits
Not all CRA contact is an audit. There is a spectrum of review types, ranging from routine matching inquiries to full field audits. Understanding which type you are dealing with determines the appropriate response.
Matching review
Low complexityThe CRA compares information on your return against data from third-party sources — T4s, T5s, T3s and other slips. If a slip was issued to you but not reported on your return, you will receive a letter requesting clarification or proposing a reassessment.
Pre-assessment review
Low complexityBefore issuing a Notice of Assessment, the CRA may request supporting documentation for specific claims — most commonly RRSP contributions, medical expenses or tuition amounts. These reviews happen before your refund is issued.
Post-assessment review (desk audit)
Medium complexityAfter your return is assessed, the CRA may select it for review. You will receive a letter asking you to substantiate specific claims. This is not a full audit — it is a review of particular items on your return.
Field audit
High complexityA full examination of your records, typically by a CRA auditor who may visit your premises or request all financial records. Field audits are more common for businesses and are significantly more involved than a desk audit.
Net worth audit
High complexityIf the CRA believes your reported income does not match your lifestyle or assets, they may conduct a net worth assessment — comparing changes in your assets, liabilities and personal expenditures against reported income.
What commonly triggers a CRA review
While the CRA selects some returns randomly, most reviews are triggered by specific patterns in your return. Knowing what these are helps you understand your risk and maintain the documentation needed to respond.
- Unusually high deduction claims relative to your reported income
- Inconsistent income reporting across multiple years
- Home office or vehicle expense claims that appear disproportionate
- Business losses reported for three or more consecutive years
- Cash-intensive businesses in industries the CRA has identified as higher risk
- Significant changes in income from one year to the next without an apparent reason
- Third-party information that does not match what you reported
- A prior audit that identified issues — subsequent years may receive closer scrutiny
LevelTax prepares returns with audit risk in mind — claims are supported with documentation, deductions are applied correctly and we flag anything that could attract CRA attention before filing.
Already received a letter from the CRA?
LevelTax handles CRA correspondence for our clients. Get in touch right away — the sooner we review the letter, the better your options.
What the CRA can request
During a review or audit, the CRA can request any records that are relevant to the items under review. For a personal return, this typically means receipts, bank statements and supporting documentation for specific claims. For a business audit, it can extend to all financial records, invoices, contracts, bank accounts and records of shareholder transactions.
The CRA can examine records up to six years after the return was filed in most circumstances. In cases where the CRA believes there has been misrepresentation or fraud, there is no time limit.
You are entitled to know what the CRA is looking for. A professional helping you respond to an audit will ensure the CRA receives exactly what it is entitled to and nothing more — scope creep during an audit is a common way that manageable reviews become significantly larger.
How to respond to a CRA review
Read the letter carefully
Identify exactly what the CRA is asking for, the specific tax year in question and the deadline for your response. Missing the deadline makes the situation worse.
Gather documentation
Pull together every receipt, invoice, bank statement, contract or other record that supports the claims being questioned. Documentation from six or seven years ago may be required.
Respond completely and on time
A complete, organized response is significantly better received than a partial or late one. The CRA is more likely to accept claims that are clearly supported.
Work with a professional
If the audit involves substantial amounts, complex transactions or business income, responding without professional help is a significant risk. LevelTax handles CRA correspondence and audit responses for all clients.
Responding to a reassessment
If the CRA reviews your return and determines that your tax was understated, they will issue a Notice of Reassessment showing the additional tax, interest and any penalties they believe you owe. You have 90 days from the date of the reassessment to file a Notice of Objection if you disagree.
Filing a Notice of Objection puts the CRA’s collection on hold while the dispute is reviewed. The CRA has a dedicated Appeals Division that reviews objections independently of the audit team. If the objection is unsuccessful, you can appeal to the Tax Court of Canada.
LevelTax handles the full objection process for clients who receive reassessments we believe are incorrect. We prepare the Notice of Objection, compile the supporting documentation and manage the communications with the CRA Appeals Division.
Received a reassessment you think is wrong?
LevelTax reviews reassessments and files Notices of Objection when the CRA’s position is incorrect. Get in touch as soon as possible — the 90-day deadline does not wait.
Your rights during a CRA audit
Taxpayers have specific rights during the CRA audit process. The CRA is required to conduct audits professionally, treat taxpayers fairly and give you a reasonable amount of time to respond to requests. You are entitled to representation at any point during the process.
You are not required to answer questions verbally during an audit without having a chance to verify the facts. Requests for records that go beyond the scope of the audit can be challenged. If you believe an auditor is treating you unfairly, you can contact the CRA’s taxpayer service to raise a concern.
Having a professional represent you throughout the audit process ensures these rights are exercised and that you are not inadvertently providing information that expands the scope of the review. LevelTax acts as the point of contact with the CRA on behalf of our clients during audits and reviews.
CRA audit representation
LevelTax represents clients through CRA reviews, audits and reassessments
Whether you have just received a routine review letter or a formal reassessment, LevelTax handles the response. Get in touch as soon as possible so we can assess the situation.
Bottom line
The best response to a CRA letter is a prompt, complete and professionally prepared one.
Ignoring CRA correspondence, responding late or providing incomplete documentation all make the situation worse. LevelTax clients do not handle CRA reviews alone — we manage every letter, every request for documentation and every reassessment response as part of our standard engagement.
Talk to LevelTax about your CRA situation