Audit
The Canada Revenue Agency’s (the “CRA”) audit process is a mechanism to ensure tax compliance. The following is a general overview of how this process typically unfolds:
- Initial Contact: The CRA notifies the taxpayer of an audit through a letter. This letter will specify the tax years under review and lists the documents and questions required from the taxpayer. Usually this letter will give us a good understanding of what the CRA is looking for, so that we can plan accordingly.
- Document/Information Submission: The taxpayer responds by submitting the requested documents along with any additional supporting evidence to address the CRA’s inquiry.
- Proposal Letter: The CRA may issue a Proposal Letter. This document outline’s the CRA’s findings and makes proposals with respect to the tax years under audit. This letter is not final and can be contested.
- Taxpayer’s Response to Proposal Letter: Taxpayers have the opportunity to make further submissions to dispute the Proposal Letter, providing substantive legal arguments and additional documentation to support their case.
- Conclusion of the Audit: The audit can end in several ways:
- No Change: The audit confirms the accuracy of the original tax filings, and no changes are made.
- Adjustment: The CRA adjusts the amounts reported, which might result in additional taxes owed. In this case, the Minister of National Revenue (the “Minister”) will issue a Notice of Reassessment. A Taxpayer can dispute the Notice of Reassessment by filing a Notice of Objection within 90 days, or making an Application for an Extension of Time within 1 year after the 90 days have expired. An Application for and Extension of Time is often granted, but this is not guaranteed.
- No Change: The audit confirms the accuracy of the original tax filings, and no changes are made.