You Received a CRA Audit Letter: What to Do First in Ontario

Opening a letter from the Canada Revenue Agency announcing an audit is unsettling, even if you've done nothing wrong. Being selected for an audit is not, by itself, an accusation of anything — the CRA runs audits based on industry risk-scoring, unusual deduction patterns, third-party information, foreign-property reporting, and random selection, among other reasons. But how you respond in the first few weeks can meaningfully affect how smoothly the process goes.

This guide walks through the practical first steps for an Ontario taxpayer or business owner who has just received a CRA audit letter, before you send a single document back.

Step 1: Read the Letter Carefully

CRA audit letters vary, but most identify:

• Which tax years or reporting periods are under review
• Which return(s) — personal income tax, corporate income tax, or GST/HST — are involved
• The auditor's name and contact information
• An initial list of documents or records requested
• A deadline to respond or to schedule an initial meeting

Note the scope precisely. An audit letter about your 2023 GST/HST filings is a narrower matter than a full-scope personal income tax audit spanning several years, and your response should be scaled to match.

Step 2: Don't Ignore the Deadline — But Don't Rush Either

The instinct many people have is either to panic and hand over every document they can find, or to freeze and do nothing. Both can hurt you.

• Ignoring the letter doesn't make the audit go away. It typically leads to follow-up demands, and eventually to a formal Requirement for Information, which carries its own compliance obligations.
• Handing over everything immediately, without first organizing and reviewing what you're sending, can create confusion, invite follow-up questions about documents that were never actually requested, and make it harder to control the narrative of the audit.

The better approach is a measured one: confirm receipt with the auditor if a meeting date is proposed, and take a reasonable amount of time to gather and review records before submitting anything.

Step 3: Gather — and Review — Your Own Records First

Before anything goes to the CRA, go through it yourself.

• [ ] Pull the specific returns and years identified in the letter
• [ ] Collect the supporting documents the letter actually asks for — don't volunteer more than requested
• [ ] Look for gaps, inconsistencies, or missing receipts before the auditor finds them
• [ ] If you're a business owner, reconcile your bookkeeping records against your bank statements for the period under review
• [ ] Flag anything you're unsure how to characterize (a large deposit, a personal expense run through the business) rather than guessing when asked

This review step matters because it lets you (and your advisor) understand your own exposure before the auditor does, and correct honest errors proactively where possible.

Step 4: Decide Whether You Need a Lawyer, an Accountant, or Both

Not every audit letter needs a lawyer on day one. A routine, narrow document request may be something your accountant or bookkeeper can handle directly. Consider bringing in a lawyer when:

• The amounts involved are significant
• You suspect the audit could expand into a net worth analysis or allegations of misrepresentation
• You're being asked about matters that could carry penalties, not just a routine reassessment
• Communications with the CRA touch on something you'd want protected by solicitor-client privilege
• You're a director of a corporation and the audit touches on unremitted source deductions or GST/HST, which can expose directors to personal liability

A lawyer can also manage communications with the auditor on your behalf, which keeps the process more structured and reduces the risk of an offhand comment being misread later.

Step 5: Understand What Comes Next

A CRA audit generally follows a predictable arc, even though the length of any individual stage isn't fixed and varies by case:

1. Initial letter and document request (where you are now)
2. Auditor review, which may include follow-up questions, interviews, or site visits for a business
3. Proposal letter, setting out the CRA's preliminary findings and giving you a chance to respond before anything is finalized
4. Notice of Reassessment, if the CRA proceeds with changes to your reported income or tax owing
5. Notice of Objection, your formal avenue to dispute a reassessment you believe is wrong, filed with the CRA's Appeals Branch
6. Tax Court of Canada appeal, if the objection doesn't resolve the dispute

Knowing this sequence in advance helps you recognize that a proposal letter is not the final word — it's an opportunity to correct the record before a reassessment is even issued.

What Not to Do

• Don't provide documents beyond the specific scope requested without thinking it through
• Don't guess at answers to an auditor's questions — "I'll confirm and get back to you" is a fine answer
• Don't destroy or alter records, even ones you're embarrassed by
• Don't assume the audit is personal — most are procedurally driven, not targeted

Frequently asked questions