Case Study: Montreal CPA Firm Rescues Business from a GST Audit Nightmare

A Montreal service business received a sudden GST audit notice from the CRA that quickly turned into a full-scale investigation. Revenues didn’t match deposits, input tax credits were questioned, and the auditor threatened reassessment for multiple years. The business owner was overwhelmed and feared tens of thousands in taxes, penalties, and interest.
With professional intervention, the situation shifted from a looming disaster to a complete recovery and the audit closed with no money owed.

This case study shows exactly how the right CPA team reversed the audit outcome and protected the client from financial harm.

The Audit Nightmare Begins

The CRA audit started with a standard verification request, but escalated because:
• revenue reported on GST returns didn’t match bank deposits
• ITCs (input tax credits) were missing documentation
• subcontractor expenses looked personal
• online sales platforms weren’t reconciled
• bookkeeping hadn’t been updated for months

The auditor suspected:
• unreported income
• ineligible ITCs
• false business expenses

A draft reassessment projected over $40,000 in GST and penalties.

Why the Audit Escalated

Several issues made the audit worse:
• three GST periods were missing ITC support
• bookkeeping used incorrect tax codes
• the business had sales from multiple platforms (Stripe, PayPal, POS)
• no reconciliation existed between deposits and reported revenue
• inconsistent explanations were given before the CPA got involved

The auditor began preparing a multi-year reassessment.

How Mackisen CPA Reversed the Audit

Step 1 — Full Reconstruction of Books

Mackisen rebuilt the client’s accounting records:
• downloaded all bank transactions
• matched deposits to actual invoices
• identified investor deposits vs. taxable sales
• reconciled Stripe, PayPal, and POS reports
• corrected GST tax coding
• separated personal and business transactions

Within two weeks, complete financial statements were ready.

Step 2 — Rebuilding Input Tax Credit Documentation

The team:
• reclassified expenses
• collected missing invoices
• contacted suppliers
• prepared a detailed ITC schedule
• demonstrated business-use purpose for all purchases

This removed most of the auditor’s concerns.

Step 3 — Identifying CRA Calculation Errors

Mackisen identified:
• duplicated adjustments
• incorrect assumptions about taxable sales
• errors in auditor spreadsheet calculations

These findings were formally submitted and accepted.

Step 4 — Taking Over Communication

The CPA:
• became the single point of contact
• provided clear, consistent responses
• delivered an organized documentation binder
• challenged unreasonable assumptions
• demonstrated compliance with legislation

The auditor’s tone shifted immediately.

The Outcome

CRA accepted all explanations and documentation.

Final audit results:
• No GST owing
• No penalties
• No interest
• No additional audit periods opened
• File officially closed

The business avoided more than $40,000 in proposed reassessments.

Key Takeaways

• Poor bookkeeping can trigger severe GST audits
• CRA auditors make mistakes — and they can be corrected
• Clear, organized documentation changes everything
• A CPA must control communication to avoid misinterpretation
• Reconciliation of deposits is essential for audit defense

Client Testimonial

“Without Mackisen, I would have gone bankrupt. The CRA was ready to reassess me for years. Your team literally saved my business.”

Common Questions

Why did CRA target this business?
Large variances between deposits and reported revenue.

Is it too late to fix GST records during an audit?
No reconstruction is common and often successful.

Can a CPA really eliminate penalties?
Yes when errors are clerical and documentation is strong.

What if the auditor already prepared a reassessment?
It can still be challenged successfully.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal specializes in GST/HST audit defense, financial reconstruction, and resolving complex audit situations. We protect businesses from costly reassessments and ensure long-term compliance.