You open the mail and there it is, a letter from the Canada Revenue Agency (CRA). Your stomach drops. But before you panic, it's important to understand what this actually means and what you need to do.
First: it may not be an audit
The CRA sends different types of correspondence. A review is the most common. They're looking at a specific item on your return and want supporting documentation. This is not a full audit and is much less extensive, but it still requires a proper response with organized documentation to support your position.
An examination is more in-depth. The CRA is looking at multiple items or areas of your return. An audit is the most comprehensive. They're examining your entire financial situation for a given period.
The letter will tell you which type it is and exactly what they're requesting. Read it carefully.
What the CRA is looking for
The CRA selects files for review based on their own internal criteria. Sometimes it's random, sometimes it's because something on your return didn't align with what they expected.
In most cases, they simply want to verify that what you reported is supported by documentation.
What to do when you receive the letter
Don't ignore it. The CRA has deadlines for responding, and if you miss them, they'll proceed without your input, which usually means a reassessment in their favour.
Gather your documents. Pull together everything related to what they're asking about and organize it before responding.
Get professional representation. A CPA can act as your authorized representative, handle all communication with the CRA, prepare and organize your supporting documentation, and present your case in the format the CRA expects.
What happens next
If you provide the documentation and the CRA is satisfied, the file is closed. If they disagree with something, they'll issue a reassessment. At that point, you have options, including requesting a review or filing a formal objection if warranted.
How you respond at the beginning matters. A well-organized, professional response can often resolve the matter quickly.
