Quick Tips

We're here to help with answers to your initial questions.

What is an Audit?
An audit is a detailed examination of your tax return. It will generally begin with a letter or notice listing all the records you will need to produce at your audit appointment. After the auditor has completed the audit, you may receive an assessment or reassessment letter indicating additional taxes owed plus interest and penalties.

Most returns are selected for audit from a comparison of selected financial information for current and previous years of taxpayers engaged in similar businesses or occupations. Specific returns are chosen from computer-generated lists of returns for potential audit.

Common ways of selecting returns for audit:
  • Computer-generated lists
  • Audit projects
  • Leads
  • Secondary files

What is a Review?
Returns are reviewed for income, deductions, and credits in an effort to promote taxpayer compliance and awareness of tax laws by identifying common areas of misunderstanding. Generally, a review takes place before an audit occurs, but the outcome of a review does not always result in an audit.

There are a number of reasons why a tax return may be selected for review under the Pre-Assessment Review, Processing Review or Matching programs:
  • Random selection
  • Comparison of information to third-party information sources, such as T4 information slips
  • Types of deductions or credits claimed and an individual's review history

The CRA initially processes most returns without conducting a manual review of the information filed so that it can send out Notices of Assessment as quickly as possible. However, all returns are screened by the agency's computer system when the returns are filed and may be subject to review at a later date.

The Canada Revenue Agency (CRA) selects taxpayers for audit and review by both random and specific selection processes.

Computer-generated Lists
Most returns are selected for audit review from computer-generated lists. For example, the computer system can compare selected financial information of taxpayers engaged in similar businesses or occupations and generate lists of returns with audit potential. From these lists the CRA chooses specific returns to be audited.

Audit Projects
In some cases, audits are used to test the compliance of a particular group of taxpayers. If the test results indicate that there is significant non-compliance within the group, the CRA may audit the group's members on a local, regional, or national basis.

Leads include information from other audits or investigations, as well as information from outside sources, like the media, public record, or informants who have given the CRA reason to believe a return has been prepared incorrectly or not in compliance with the tax laws.

Secondary Files
Sometimes files are selected for audit because of their association with other previously selected files. For example, if you are in partnership with another taxpayer, and that person's file has been selected for audit, it is usually more convenient to examine all the records at the same time.

Pre-assessment Review Program
The CRA reviews various deductions and credits on returns before issuing the Notice of Assessment and the refund, if there is one. The peak period for this type of review is February to July.

Processing Review Program
This program is similar to the Pre-assessment Review Program except the review takes place after the Notice of Assessment has been issued. The peak period for this type of review is June to November.

Matching Program
This review also takes place after the Notice of Assessment has been sent. Under this program, the information on an individual's tax return is compared to the information provided by third-party sources, such as employers or financial institutions.

Example: the amount of income an individual reported on his or her tax return can be compared to the employment income shown on T4 slips that the individual's employer has filed with the CRA or to the investment income shown on T5 slips.

The Matching Program provides support for other important programs such as the Canada Child Tax Benefit, the GST/HST credit, and the Guaranteed Income Supplement by correcting the net income reported by individuals.

Also, the Matching Program corrects errors relating to an individual's RRSP deduction limit and spousal-related claims, including child-care expenses, provincial tax credits, and provincial tax reductions. The peak period for this type of review is September to March.

Beneficial Client Adjustments - The Matching Program administers the Beneficial Client Adjustments Initiative. Currently, this initiative identifies under-claimed credits relating to tax deducted at source and Canada Pension Plan contributions by comparing an individual's return to third-party information. The CRA adjusts the return to allow the amount the individual is entitled to, and then issues a Notice of Reassessment and a refund, if it applies.

Do NOT Represent Yourself in a Tax Audit or Review
The tax law in Canada is sophisticated and well beyond the scope of the average taxpayer.

Our Experienced Tax Professionals:
  • Defend taxpayers for a living and are experts in this specialty.
  • Know more about the CRA and taxes than the taxpayer they are defending does, and the CRA knows it.
  • Do not react defensively because the audit is business, not personal.
  • Know when the position that the auditor is taking is mistaken and totally without merit.
  • Know that simple misstatements can result in an inappropriate but justifiable position by the CRA
  • Know from experience the weak areas in any income tax return and gather the information needed to end the questioning before it begins.
  • Can identify areas in an income tax return that can generate a refund or reduce the impact of lost deductions.
  • Present your case in the most favorable light in a manner that will close the audit as quickly as possible.