CRA HST ITC Audit — Montreal CPA Firm Near You: Defending Your HST Input Tax Credit Claims

A CRA HST ITC Audit reviews your business’s eligibility to claim Input Tax Credits (ITCs) for Harmonized Sales Tax (HST) paid on business-related expenses. If your business has purchased goods or services and paid HST, you may be eligible to recover that HST by claiming ITCs. However, if CRA believes that your claims are incomplete, inaccurate, or misclassified, they may initiate an audit to verify your eligibility for these credits.

Mackisen CPA Montreal specializes in defending HST ITC claims during CRA audits by ensuring that all purchase expenses are properly documented, eligible for ITCs, and that the HST is correctly calculated. We help you defend your tax filings and ITC claims while ensuring full compliance with the Excise Tax Act.

Legal Foundation

Excise Tax Act s.169 — governs Input Tax Credit (ITC) claims for HST paid on eligible business purchases.
Excise Tax Act s.165 — defines the rules for HST collection and remittance, including the criteria for claiming ITCs.
Excise Tax Act s.231.1 — grants CRA the authority to audit ITC claims and request supporting documentation for HST transactions.
Jurisprudence: Revenu Québec v. Bell Canada (2020) — confirms that complete documentation and clear expense allocations are essential for successful ITC claims.

Learning insight: ITC claims require careful documentation to defend against CRA audits. Accurate records prevent potential disallowances and penalties.

Why CRA Conducts HST ITC Audits

CRA initiates HST ITC audits when it detects potential issues with your ITC claims or finds discrepancies between your tax filings and supporting records. Common reasons for HST ITC audits include:
• large or frequent ITC claims that appear disproportionate to the business’s taxable sales
• incomplete or missing invoices or receipt records for claimed purchases
• incorrectly claimed ITCs for non-business-related expenses
• failure to meet the HST eligibility criteria for certain goods or services
• failure to apply the correct HST rate on interprovincial transactions
• misapplication of tax credits for exempt goods or services
• incorrect self-assessment of HST on imported goods or services

Learning insight: The most common issues in HST ITC audits stem from missing documentation or incorrect classifications of business expenses. A strong defense relies on complete records and clear categorizations.

CRA HST ITC Audit Process

1. CRA issues an audit letter requesting copies of invoices, contracts, bank statements, and other supporting documents for ITC claims.

2. CRA reviews whether HST was correctly applied to business purchases and if the ITC claims match the eligible expenses.

3. CRA examines whether business expenses are used exclusively for taxable supplies and whether any personal expenses were included in the ITC claims.

4. CRA verifies whether foreign or exempt purchases are appropriately excluded from ITC claims.

5. CRA compares HST ITC claims against sales tax revenue and adjusts for any discrepancies in the business’s accounting.

6. Mackisen CPA prepares a detailed response, ensuring that all ITC claims are substantiated with complete, accurate documentation and in compliance with the Excise Tax Act.

Learning insight: Document your purchases and expenses clearly to avoid unnecessary audits. Detailed records show CRA that your ITC claims are valid.

Mackisen CPA’s HST ITC Defense Strategy

• document every business expense that includes HST paid and ensure proper invoice retention
• reconcile ITC claims with financial statements, bank records, and purchase receipts
• validate the eligibility of purchases, particularly for services and capital assets
• ensure compliance with HST rates for interprovincial transactions
• file missing HST returns or amended returns if discrepancies are found during the audit
• submit a complete audit defense package with legitimate business expenses, including third-party invoices
• prepare a CPA-certified audit response, ensuring all claims are backed by solid documentation and proof
• negotiate with CRA for penalty relief or interest adjustments where applicable

Learning insight: Accurate, well-documented ITC claims are the key to a successful audit response. A proactive defense ensures financial transparency.

Common Findings in HST ITC Audits

• non-business expenses mistakenly included in ITC claims
• missing or incomplete invoices for business-related purchases
• incorrect HST rates applied to purchases, especially in cross-border or interprovincial transactions
• misclassified purchases, such as personal goods or exempt services claimed for HST refunds
• failure to include required documentation for capital assets
• errors in the allocation of HST for shared-use items (e.g., home office or personal vehicle)

Learning insight: Document your HST claims thoroughly to avoid issues during an audit. Missing invoices are the most common cause of CRA disallowances.

Real-World Results

• A manufacturer saved $200,000 in potential ITC disallowances after Mackisen CPA helped the company organize capital asset invoices and properly allocate HST on mixed-use purchases.
• A retailer avoided a $50,000 reassessment by demonstrating the correct HST rate application on interprovincial sales.
• A technology firm cleared a $100,000 audit adjustment when we provided documentation showing that its R&D expenses were fully eligible for ITC claims.

Learning insight: Clear documentation and proper ITC allocation are key to avoiding reassessments and ensuring successful audits.

SEO Optimization and Educational Value

Primary keywords: CRA HST ITC audit, Mackisen CPA Montreal, HST ITC defense, CRA sales tax audit, HST compliance, tax credit defense
Secondary keywords: HST audit defense, input tax credit claims, CRA sales tax audit, tax remittance compliance, HST penalty reduction, ITC claims documentation

Learning insight: Clear documentation and consistent classification help both your CRA compliance and SEO rankings, ensuring your business stays visible and compliant.

Why Mackisen CPA Montreal

With 35 years of experience defending HST audits, input tax credit (ITC) claims, and sales tax compliance for businesses across Quebec, Mackisen CPA Montreal ensures your HST filings are properly documented, defensible, and compliant with CRA standards. We provide proactive audit defense, penalty relief, and correction services for your HST returns.

Learning insight: HST audits can be overwhelming, but with proper documentation and CPA support, your business can avoid penalties and tax reclassification.

Call to Action

If CRA has audited your HST ITC claims or requested sales tax documentation, contact Mackisen CPA Montreal for comprehensive audit defense and tax compliance services.
Phone: 514-276-0808 | Email: info@mackisen.com | Website: mackisen.com

Learning conclusion: HST audits test your documentation and compliance with tax laws. Mackisen CPA Montreal ensures your ITC claims and HST filings remain defensible and audit-ready, saving you from costly penalties and reclassifications.