CRA Tax Credit Audit — Montreal CPA Firm Near You: Defending Your Eligibility for Tax Credits and Refunds

A CRA Tax Credit Audit examines your business's eligibility for various tax credits, including SR&ED credits, investment tax credits, employee tax credits, and more. CRA will audit these claims to ensure that all expenses, income, and claims are valid, properly documented, and compliant with tax laws. The audit focuses on ensuring that tax credits are being claimed for eligible activities or purchases and that the appropriate amounts are reported on your corporate tax returns.

Mackisen CPA Montreal specializes in defending tax credit audits by ensuring accurate documentation, claim eligibility, and proper application of tax credit laws. We help businesses navigate the complexities of tax incentives, demonstrating compliance and ensuring that the credit claims stand up to CRA scrutiny.

Legal Foundation

Income Tax Act s.127 — defines the SR&ED tax credit program and eligibility criteria for research and development claims.
Income Tax Act s.110 — outlines the investment tax credit rules and qualification criteria for businesses making eligible investments.
Jurisprudence: Canadian Forest Products v. Canada (2013 FCA) — establishes that tax credit claims must align with both tax laws and business operations.

Learning insight: Tax credits require both qualifying activity and documented evidence. A clear audit trail is critical for success.

Why CRA Performs Tax Credit Audits

CRA typically performs tax credit audits when:
• unusually large or frequent tax credits are claimed (especially for SR&ED, investment, or employee benefits)
• there is a discrepancy between the reported tax credit and supporting documents
• the business is claiming tax credits for activities or assets that may not fully meet the eligibility criteria
• tax credits are being claimed by new businesses or businesses in industries with frequent audits
• non-eligible expenses are included in tax credit claims (e.g., personal expenses claimed as business expenses)
• the business activity does not align with the requirements of the tax credit program (e.g., claiming an investment tax credit for non-qualifying equipment)

Learning insight: Large tax credits often trigger audits, but businesses can reduce their audit risk by ensuring the claim is properly documented and meets legal criteria.

CRA Tax Credit Audit Process

1. CRA issues an audit letter, requesting supporting documentation for claimed tax credits.

2. CRA verifies the eligibility of the credits, including confirming that expenses and investments align with tax credit laws.

3. CRA cross-references tax returns with supporting documentation, such as invoices, contractual agreements, and financial statements.

4. CRA examines employee records, research reports, or equipment invoices to confirm that qualifying activities occurred.

5. CRA evaluates whether the claimed tax credits match the applicable credit criteria.

6. CRA may propose adjustments, penalties, or interest charges if discrepancies are found or the credits are deemed ineligible.

7. Mackisen CPA prepares a defense package with the necessary documentation, explaining eligibility, and responding to CRA’s findings.

Learning insight: Tax credits require proof of both eligibility and substance behind the claims. Your CPA ensures clear evidence supports the claims.

Mackisen CPA’s Tax Credit Defense Strategy

• ensure accurate eligibility criteria are met for each tax credit
• document qualifying activities (e.g., SR&ED projects, investment assets) with supporting invoices, contracts, and project timelines
• verify that employee tax credits are based on legitimate payroll data
• properly classify eligible expenses and ensure supporting receipts are attached
• reconcile tax credit claims to financial statements, bank records, and tax returns
• prepare a defense package for CRA, including audit-ready documents, proof of qualification, and justifications for claims
• respond to CRA audits by filing corrections or amended returns if discrepancies are found
• assist in appeals or negotiations if CRA adjusts the tax credits

Learning insight: A well-organized defense package with clear documentation ensures credibility with CRA.

Common CRA Tax Credit Audit Findings

• non-qualifying expenses claimed as part of the tax credit (e.g., personal expenses or non-business-related activities)
• missing documentation to support the claiming of tax credits
• discrepancies between tax returns and financial statements
• incorrectly applied tax credit rates, especially for SR&ED or investment credits
• failure to properly allocate expenses across credit categories
• incorrectly classified assets or equipment that do not qualify for tax credits (e.g., claiming capital assets for a tax credit program)
• unreported gains or capital distributions that affect the eligibility of tax credits

Learning insight: Inadequate documentation is the most frequent issue in tax credit audits. Thorough records prevent this outcome.

Real-World Results

• A technology company recovered a $400,000 SR&ED credit after Mackisen CPA clarified project timelines and reclassified eligible expenses, preventing penalties.
• A manufacturing firm saved $350,000 in investment tax credits after we demonstrated that new equipment purchases were eligible for the tax credit program.
• An IT consulting firm avoided a $200,000 reassessment when we provided detailed evidence of their employee tax credit eligibility and project work.

Learning insight: Clear and credible evidence is the foundation of a strong tax credit defense. We ensure your documentation stands up to CRA’s scrutiny.

SEO Optimization and Educational Value

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Learning insight: Proper documentation and qualifying evidence create a strong foundation for successful tax credit audits. This approach helps build both your tax compliance and SEO authority.

Why Mackisen CPA Montreal

With more than 35 years of experience in CRA audits and tax credit defense, Mackisen CPA Montreal is your trusted partner in handling SR&ED, investment tax credits, and other tax relief programs. We provide thorough documentation, expert tax guidance, and CPA-certified audit defense to ensure full compliance and avoid penalties.

Learning insight: CRA audits are complex, but with Mackisen CPA, your tax credit claims are always well-documented, defensible, and compliant.

Call to Action

If CRA has initiated an audit of your tax credit claims or proposed adjustments, contact Mackisen CPA Montreal for immediate audit defense and documentation support.
Phone: 514-276-0808 | Email: info@mackisen.com | Website: mackisen.com

Learning conclusion: A CRA Tax Credit Audit is a thorough review of your tax claims and documentation. Mackisen CPA Montreal ensures your documentation is flawless, eligible claims are supported, and adjustments are minimized.