Your CRA Audit or Review: A Calm, Step-by-Step Action Plan

A letter from the CRA is not a verdict — here's exactly what to do, in order.

Who this is for & what you'll get. You opened your mail (or your CRA My Account) and found a letter from the Canada Revenue Agency asking questions about your return. This guide is for individuals and small-business owners in Ontario who want a clear, level-headed plan: what to do in the first 72 hours, your rights along the way, how to respond, and what your options are if you disagree.

⚖️ This is a general guide, not legal advice. It can't account for your specific situation. Use it to get oriented, then confirm the details with a licensed Ontario lawyer.

📌 Treadstone is not your accountant. This is a legal-process guide. For the numbers on your return — what's deductible, how to characterize income, which positions to take — work with a tax professional and confirm anything with the CRA directly.

First, breathe. A review is not an accusation.

Most CRA contact is routine. The agency processes millions of returns and runs automated and manual checks every year. Receiving a letter usually means one item needs supporting documents — not that you're in trouble, and not that you've been accused of anything.

The single biggest mistake people make is reacting emotionally instead of responding methodically. Panic leads to missed deadlines, incomplete answers, and saying too much. A calm, complete, on-time response is your best tool.

⏰ The most important thing on the page is the deadline. Find it, write it down, and put it where you'll see it daily. Missing it is far worse than the underlying question.

The first 72 hours: five moves

1. Find and note the deadline

• Locate the response-by date on the letter (it's usually near the top or bottom).
• Add a buffer: aim to respond several days early, not on the last day.
• Note the reference number and the contact name or division — you'll need them on every reply.

Why it matters: Deadlines drive everything that follows. If you genuinely can't meet it, you can usually call and request an extension — but only before it passes, and only if you ask.

2. Read exactly what they're asking — twice

• Identify the specific year(s) under review.
• Identify the specific item(s) — a deduction, a credit, a slip, rental income, a business expense category.
• Underline the exact documents they request.

CRA letters fall on a spectrum. A simple "processing review" or "pre-/post-assessment review" asks you to back up one or two line items. A full audit is broader. Knowing which you're facing tells you how much to prepare.

⚠️ Watch out: Answer the question asked — and only that question. Volunteering unrelated information can widen the scope unnecessarily.

3. Gather your records

• Pull the receipts, slips, statements, and contracts that support the item in question.
• Organize them in the same order the letter lists them.
• Label each document clearly (date, amount, what it supports).
• Keep the originals; send clean copies.

If a receipt is missing, don't fabricate or estimate. Look for secondary proof — bank or credit-card statements, vendor records, calendar entries, emails. A reasonable, documented reconstruction is far better than a gap or a guess.

4. Respond completely, in writing, on time

• Write a short cover note that lists what you're enclosing and answers the question plainly.
• Attach documents in a logical, labelled order.
• Use the channel the letter specifies (often the secure "Submit documents" feature in CRA My Account, or the address/fax given).
• Keep a complete copy of everything you send, plus proof of the date sent.

A complete first response often closes the file. A partial one invites follow-up letters and a longer process.

5. Be truthful and concise

The CRA is owed accurate information. Be honest, be brief, and don't speculate or argue in your cover note. If you don't know something, say so and explain what you're doing to find out.

💡 Tip: Facts persuade; arguments rarely do at this stage. Let your documents do the talking.

Your rights as a taxpayer

You are not powerless in this process. Canada publishes a Taxpayer Bill of Rights, and the Office of the Taxpayers' Ombudsperson exists to uphold service rights. In plain terms, you are entitled to:

• Be treated professionally, courteously, and fairly.
• Complete, accurate, clear, and timely information about what's expected of you.
• Privacy and confidentiality — your information is protected. The CRA is bound by the federal Privacy Act and, for tax information specifically, by s. 241 of the Income Tax Act, which bars officials from releasing your taxpayer information except as that Act allows. (PIPEDA, the private-sector privacy law, does not apply to the CRA.)
• Be represented by a person of your choice (an accountant or a lawyer).
• A formal review and a subsequent appeal if you disagree with an assessment.
• Relief from penalties and interest caused by circumstances beyond your control (the CRA's taxpayer relief provisions — verify current criteria with the CRA).
• Service complaints through the CRA Service Feedback process and, if unresolved, the Ombudsperson.

Knowing these rights helps you stay calm and assertive without being adversarial.

Should you get representation?

You can handle a simple document review yourself. Consider bringing in a professional when:

⚠️ Privilege is a key distinction. Communications with a lawyer about a legal matter can be protected by solicitor-client privilege. An accountant's working papers generally are not privileged the same way. If there's any chance of a serious dispute or unreported income, speak to a lawyer first, who can then engage the accountant if needed.

You can authorize a representative to deal with the CRA on your behalf (through the CRA's authorization process). You stay in control and can revoke it at any time.

Common audit triggers (so you understand the "why")

The CRA uses risk scoring and comparisons against norms. Files are more likely to draw attention when they show:

• Unusually large deductions relative to income (donations, employment expenses, professional fees).
• Rental losses, especially recurring year after year, or a property that looks more like personal use.
• Cash-intensive businesses (trades, food service, salons) where reported margins look low.
• Real estate activity — property "flips," principal-residence claims, pre-construction assignments, and unreported dispositions.
• Big year-over-year swings in income or expenses with no obvious explanation.
• Mismatches between what you reported and the slips third parties filed (T4s, T5s, T3s).
• Self-employment and the gig economy, where income may not be slip-reported.

None of these are "wrong." They simply attract a second look. Good records are your defence.

The levels: desk review vs. field audit

Desk / correspondence review (most common). Conducted by mail or online. You send documents for specific line items; an officer reviews and adjusts (or confirms) your return. This is the kind most individuals see, and the five-step plan above is built for it.

Field audit (less common, more involved). An auditor examines your books and records in depth — sometimes for a business or multiple years — and may request to meet, see source documents, and review your bookkeeping. If you're facing a field audit, representation is strongly advisable. Keep the process organized: a single point of contact, written confirmations of what was provided, and notes of every conversation.

💡 Tip for any level: Keep a simple log — date, who you spoke to, what was said, what was requested, what you sent. It protects you and keeps the file moving.

What happens next — and what if you disagree

After reviewing your response, the CRA will either accept your return as filed or issue a (re)assessment changing it. If you disagree with the result, you have a formal path — and timelines that matter.

Step 1 — Ask for an explanation

Sometimes a quick call or a request for the auditor's reasons resolves a misunderstanding before it hardens into a dispute.

Step 2 — File a Notice of Objection

A Notice of Objection is your formal challenge to an assessment or reassessment. It moves the file to the CRA's Appeals area, where an officer independent of the original decision reviews it.

⏰ Strict deadline. For most taxpayers the deadline is 90 days after the date the notice was sent. For an individual (other than a trust), s. 165(1) of the Income Tax Act gives you the later of that 90 days and one year after your filing-due date for the year — which is often the more generous of the two, so check both. Still confirm the exact deadline and any extension rules with the CRA; time limits are unforgiving. If you miss it, you may be able to apply for an extension, but you must act quickly and show valid reasons.

A strong objection is specific: it states the facts, the issue, and why the law supports your position, with documents attached.

Step 3 — Appeal to the Tax Court (if needed)

If Appeals doesn't resolve it, you can take the matter to the Tax Court of Canada, often starting with its informal procedure for smaller amounts. This is where a lawyer's involvement is most valuable.

If you have unreported income or past mistakes

If, while gathering records, you realize a prior return was wrong — unreported income, a missed slip, an offshore account — do not simply hope it goes unnoticed.

The CRA's Voluntary Disclosures Program (VDP) may let you correct past filings and potentially reduce penalties and prosecution risk — but generally only if you come forward before the CRA contacts you about it. Once a review or audit has begun on that issue, the window may close.

📎 See the companion guide on the Voluntary Disclosures Program for who qualifies, the conditions, and how to approach it. Speak to a tax lawyer before disclosing — timing and how you present it matter a great deal. Verify current VDP rules and eligibility with the CRA.

Mini-FAQ

Does a review mean I'm being audited? Usually no. A routine processing or post-assessment review simply asks you to support specific items. An audit is broader and deeper.

Can I get more time to respond? Often yes — but you generally have to ask before the deadline passes. Call the number on the letter and request an extension.

Should I just pay what they say to make it go away? Not necessarily. If you have records supporting your position, respond with them. If you disagree with a reassessment, you have formal objection and appeal rights — but watch the deadlines.

Will representation make me look guilty? No. You have an express right to be represented. Using an accountant or lawyer is normal and often makes the process faster and smoother.

How Treadstone Law can help

A CRA letter is stressful, but it's a manageable process — especially with someone in your corner who knows the rules of engagement.

• Flat-fee clarity. We tell you the cost up front, with no surprise hourly bills.
• Start online, anytime. Open a file through our secure intake and we'll review your letter and map out a plan.
• All of Ontario, virtually. Our office is in Mississauga, and we serve clients across the province.

We can help you understand the letter, frame a complete response, protect your rights, prepare a Notice of Objection, and coordinate with your accountant — and, where past issues exist, advise on the Voluntary Disclosures Program before you take a step you can't undo.

📞 1-844-900-1070 · Learn more at treadstonelaw.ca/tax · See flat fees at treadstonelaw.ca/pricing · Start now at treadstonelaw.ca/start-file

This is not legal advice

This guide is general information, not legal advice. Reading it does not create a lawyer-client relationship. Ontario laws, tax rates, and government programs change, and how the law applies depends on your specific facts. For advice about your situation, speak with a licensed Ontario lawyer. Treadstone Law is licensed by the Law Society of Ontario — reach us at 1-844-900-1070 or start a file online.