If you have never been audited before, you probably have no idea
what to expect. Most audits follow the same 15 stages (more or
less). On the taxpayer's side of things, each stage is
CRA Selection Process: The taxpayer
usually has no involvement in this process. It all happens behind
the scenes and the taxpayer can only guess why their name was
selected. Sometimes the taxpayer is randomly selected. Sometimes
the taxpayer is selected as a result of the industry segment in
which they operate. Sometimes the taxpayer is selected because of
something in a filing with the CRA. Sometimes the taxpayer is
selected because of a tip made to the CRA.
The Audit Letter: The taxpayer
receives a letter from the CRA notifying them that they are to be
audited. Normally, the taxpayer is asked to contact the CRA
auditor. However, sometimes the auditor just shows up at the
The CRA letter requesting certain
documents: Usually the CRA auditor will send to the taxpayer a
letter indicating what documents need to be provided before the
initial meeting at the taxpayer's premises or what documents
must be available for the first day of the audit.
Initial Meeting: If the audit occurs
at the taxpayer's premises, the auditor will have a meeting at
the start of the audit. The auditor explains what is expected
during the audit. The taxpayer should also communicate to the
auditor what is expected. The taxpayer may indicate that the
auditor must deal with a specific person so that the entire
organization does not end up working for the auditor.
Fieldwork: The on-site audit is the
fieldwork stage. The fieldwork can take place over a few days or
over a lengthy period of time.
Office work: Usually the auditor will
take information back to the CRA offices and work on the audit from
the CRA premises.
Follow-up questions: It is common for
the CRA auditor to contact the taxpayer after the fieldwork stage
of the audit. Sometimes additional documents are requested.
Sometimes additional questions are asked.
Preliminary Report: The CRA auditor
will prepare a proposal and send it to the taxpayer for comment.
Usually a proposed assessment number is provided to the
Response Letter: The taxpayer has an
opportunity to change the minds of the CRA. This is the best
opportunity to stop an incorrect assessment from being issued.
Notice of Re-assessment: The CRA
auditor sends to the taxpayer the Notice of Reassessment setting
out how much is being assessed.
CRA Collections: As of the date of
the Notice of Re-assessment, a debt is due to Her Majesty. CRA
Collections may start collection activities immediately after the
Notice of Re-Assessment is issued.
Notice of Objection: If a taxpayer
disagrees with a Notice of Re-Assessment, the taxpayer can file a
Notice of Objection.
Objection: The taxpayer will
communicate with a CRA Appeals Officer and the re-assessment will
either be confirmed, amended to reversed.
Notice of Appeal: Assuming that not
all the issues are addressed in the objection stage, a taxpayer may
file an appeal with the Tax Court of Canada.
Day in Tax Court: A taxpayer will
have their day(s) in the Tax Court of Canada if the appeal is not
settled. A Tax Court judge will listen to the parties and render a
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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