How Long Does a CRA Audit Take From Start to Finish in Canada?

You have received a letter saying the CRA wants to audit you, and the first question is usually how long this will last. It is a fair question, because an audit can feel like it hangs over everything else.

There is no official clock. This article walks through the stages, explains what tends to speed things up or slow them down, and covers what happens once the auditor finishes.

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

Why there is no set audit length

The CRA does not publish a fixed audit length. Duration depends on the condition of your records, the scope of the audit, delays from missing records and consultation with other parts of the CRA.

Any month range you hear from an accountant or friend is general experience, not an official standard. A narrow review of one expense can move much faster than a broad review of several years of a business.

Separate from how long an audit lasts is how far back the CRA can reassess. For individuals, trusts other than mutual fund trusts, and Canadian-controlled private corporations, the normal reassessment period ends three years after the earlier of the date of the original notice of assessment and the date of the original notification that no tax is payable. Mutual fund trusts and corporations other than Canadian-controlled private corporations have a four-year period. The CRA may reassess after the normal period if there was a misrepresentation attributable to neglect, carelessness or wilful default, or fraud, and in that case there is no fixed time limit. Even then, the reassessment is allowed only to the extent it can reasonably be regarded as relating to the matter that triggered the exception. Other exceptions, such as a valid waiver, also exist, so which rules apply to you is worth confirming with a lawyer or accountant.

The stages of an audit

The auditor contacts you by mail or phone, examines your records on site or at a CRA office, and the outcome is no change, a reassessment owing more tax, or a refund.

• Contact: for a business audit the auditor usually phones first, and you can hang up and call back to confirm who they are. A confirmation letter follows.
• Records: the auditor will normally ask for electronic records before meeting, such as ledgers, journals, invoices, receipts, contracts and bank statements.
• Examination: an on-site audit takes place at your residence, place of business or representative's office, and the auditor presents valid identification on arrival.
• Outcome: no change, a reassessment owing more tax, or a refund.

The auditor may also ask employees who do the accounting entries about how the business operates.

The Income Tax Act lets an authorized person inspect, audit or examine books, records and property, enter premises where a business is carried on or records are kept, and require the owner or person in charge to give all reasonable assistance and answer proper questions. An auditor may enter a dwelling-house without the occupant's consent only under a warrant, which a judge may issue on proof that entry is necessary and has been or is likely to be refused.

What slows an audit down

• Records that are missing, disorganized or hard to find, which can cause delays.
• A wide scope, such as several years or many types of income and expense.
• The auditor needing to consult others within the CRA.
• Slow replies to requests, since good records and co-operation reduce the time.

Books and records must generally be kept for a minimum of six years, and computer-based records must be kept in an electronically readable format. Keeping them in order from the start is the most practical way to shorten an audit.

Some audits use indirect methods, for example where records may be unreliable, accounts are mixed, or lifestyle does not match reported income. The net worth method compares changes in assets, liabilities and personal spending against reported income. How that affects the timing of your audit depends on your situation.

After the audit: your response window

After an audit you have 30 days to agree or disagree with the auditor's written proposal, which is a summary of the audit findings. This is CRA administrative practice, not a statutory deadline, so confirm the date in your own letter.

If you disagree, you can contact the auditor and, if that does not resolve it, the auditor's team leader before objecting formally. The auditor can also estimate any amount owing before a notice is issued, which may help limit interest.

If you later receive a notice of assessment and want to object, the objection deadline is statutory. Most individuals must serve it by the later of one year after the filing-due date and 90 days after the notice of assessment was sent.

If you object, the Minister must reconsider the assessment and vacate, confirm or vary it, or reassess, then notify you in writing. After serving a notice of objection, you may appeal to the Tax Court of Canada once the Minister confirms or reassesses, or 90 days pass with no decision, and the appeal must be filed within 90 days of the notice of confirmation or reassessment. 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, but these restrictions do not apply to amounts required to be withheld and remitted, such as payroll source deductions.

What to do next

• Note every date in the letter and diarize your response dates.
• Gather ledgers, invoices, receipts, contracts and bank statements for the years named.
• Confirm the auditor's identity before sharing information.
• Answer requests promptly and keep copies of everything you send.
• Consider speaking with a lawyer or accountant before you reply to a written proposal.

Frequently asked questions