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If you have a question, you may find your answer here in our FAQ section. Click on the topics (listed in alphabetic order) below to view the subtopics (if any), questions and answers. Post-publication changes in legislation, government policies, or the interpretation of the law could affect the validity of the information contained herein. Answers provided are current as of the date on which they are added.

Answers to these questions are not an exhaustive treatment or analysis of such subject(s) and related law. Accordingly, information herein is not intended to constitute accounting, tax, legal, investment, consulting or other professional advice or services. Before making any decision or taking any action that might affect your personal finances or business, you should consult a qualified professional adviser. Use of information is at your own risk.

Frequently Asked Questions on Tax Audit

More information on this topic can be found in our article titled "CRA Tax Audit". This article is available for purchase in our e Store.

  1. What is CRA tax audit all about?
  2. A CRA tax audit is an examination of an individual or corporation's tax return, to verify its accuracy and compliance of tax law and regulations. There are three types of tax audits:

    1. correspondence audits (also known as desk audits, CRA mails a request for additional information or documentation support);
    2. office audits (an interview is conducted at a local CRA office), and
    3. field audits (an interview is conducted at a taxpayer's place of business or residence).

    All of these audits can result in serious penalties if a tax auditor finds sufficient grounds to justify non-compliance or tax evasion.

    [This answer was added on April 23, 2009.]

  3. What should a taxpayer do when the tax man knocks on your door?
  4. First of all, confirm that the person is indeed a CRA auditor by asking for proper identification. Listen carefully what the auditor is seeking. If you do not understand what they want, seek professional help without delay. Answer only what is asked, nothing more and nothing less.

    Since there is always the chance of a tax audit, it is advisable to keep good accounting records to support all the information in a tax return. Be mindful that taxpayers bear the onus of proof in many cases.

    [This answer was added on April 23, 2009.]

  5. I did not report all of my income in my last year income tax return. What should I do?
  6. Don't panic. CRA has a Voluntary Disclosures Program that allows taxpayers to come forward and rectify incomplete or inaccurate information previously filed without penalty and prosecution (arrears interest still applies) before CRA commences a review or tax audit. This program is applicable to returns related to income tax, goods and services tax (GST), the Softwood Lumber Products Export Charge Act and the Air Travellers Security Charge Act. If CRA has not acted at the time of filing your voluntary disclosure, you need not to worry about penalty and prosecution. Given the intricacy of tax law and regulations, it is advisable to seek professional advice before you take advantage of this program.

    [This answer was added on April 23, 2009.]

  7. What is a tax review?
  8. A tax review is a process used by tax authority to verify the accuracy and the authenticity of information provided in a tax return. The following are some known CRA review programs:

    1. Pre-assessment Review Program (the peak period is January to July): The CRA reviews deductions and credits claimed in a tax return before issuing a Notice of Assessment.
    2. Processing Review Program (the peak period is June to November): The CRA reviews deductions and credits claimed by the taxpayer after issuing a Notice of Assessment.
    3. Matching Program (the peak period is September to March): The CRA compares information on a taxpayer’s tax return to the information provided by third-party sources such as employers, banks and educational institutions. Items of particular interest to the CRA include verification of employment income, investment income, Guaranteed Income Supplement (GIS); Registered Retirement Savings Plan (RRSP) purchase and withdrawal, child-care expenses, tuition fee and education amount.

    [This answer was added on May 6, 2009.]

[This page was added on April 6, 2009, last revised on May 6, 2009.]