CRA Audit Proposal Letter: Should You Agree or Push Back in Canada?

After an audit, the CRA auditor may send you a written proposal that sets out what they found and what they plan to change. It can feel like a final decision. It is not yet a reassessment, but the letter usually comes with a short deadline, and what you say next can shape the outcome.

This article explains what the letter is, the choices you have, what happens if you disagree, and how the formal objection and appeal steps work afterwards. Every file is different, so use it as a general guide and have a lawyer or accountant look at your actual letter.

This article covers Canadian federal tax law, which applies in every province.

What the proposal letter is and how long you have

At the end of an audit, the outcome can be no change, a reassessment owing more tax, or a refund. When the auditor believes more tax is owing, they send a written proposal, often called a summary of audit findings. You then have 30 days to agree or disagree with it.

That 30-day period is how the CRA generally runs its audits. It is not a deadline written into the Income Tax Act. The deadline that is set by statute is the one for a notice of objection after an assessment is issued, which is covered below. Even so, treat the 30 days seriously and reply on time, or ask in writing for more time if you need it.

Your options when you receive it

Agreeing may be sensible if the figures are right and you have no records that change them. Disagreeing makes more sense if the auditor missed documents, misread the facts, or used an estimate you can answer with evidence. Be careful about agreeing just to end the stress, because the reassessment that follows will carry tax, interest and possibly penalties.

Pushing back before anything is formally assessed

You do not have to go straight to a formal objection. You can contact the auditor first and, if the issue is not resolved, the auditor's team leader. The auditor can also estimate any amount owing before a notice is issued, which may help limit interest.

Interest on unpaid tax runs at the prescribed rate for as long as the amount is outstanding. For 1 October to 31 December 2026 that rate is 7%, and it is set quarterly.

• Read each proposed adjustment and match it to the records the auditor requested, such as ledgers, invoices, receipts, contracts and bank statements.
• Check whether the auditor used an indirect method such as net worth. It compares changes in assets, liabilities and personal spending to reported income, and any positive variance is treated as unreported income.
• If a net worth approach was used, look at whether non-taxable sources such as gifts or lottery winnings were counted, since they are part of the calculation.
• Look at any proposed penalty. For a gross negligence penalty under s. 163(2), the burden of proving the facts is on the Minister.

If you disagree: objection and appeal

If the CRA reassesses despite your disagreement, you can file a notice of objection. An individual (other than a trust) must serve it by the later of one year after the filing-due date and 90 days after the notice of assessment was sent. Other taxpayers have 90 days after the notice was sent.

The Minister must then reconsider the assessment and vacate, confirm or vary it, or reassess, and notify you in writing. If you are still unhappy, you may appeal to the Tax Court of Canada once the Minister confirms or reassesses, or after 90 days pass with no decision. The appeal must be filed within 90 days of the notice of confirmation or reassessment.

The informal procedure is unavailable if the aggregate amount in issue exceeds $25,000 or the loss in issue exceeds $50,000, unless you elect to limit the amount to those figures.

Collection, rights and what to do next

For most assessments, the CRA may not start court proceedings, certify the debt or take listed collection steps until 90 days after the notice of assessment was sent. If you file an objection, collection of the disputed amount is barred until 90 days after notice of the Minister's confirmation or variation. This does not apply to amounts that must be withheld and remitted, such as payroll source deductions. Interest still accrues on amounts in dispute, and undisputed amounts must be paid.

You may choose a person to represent you and get advice, though you remain legally responsible. Complaining or asking for a formal review should not lead to reprisal.

• Note the date on the letter and the response date it gives.
• Gather the records behind each adjustment, keeping in mind that books and records generally must be kept for at least six years.
• Decide, item by item, what you accept and what you dispute.
• Write a reply with reasons and supporting documents, and keep a copy.
• Call the auditor to discuss, and escalate to the team leader if needed.
• Diarize the objection deadline once any notice of assessment arrives.
• Consider having a lawyer or accountant review the letter before you respond.

Frequently asked questions