How Legal Assistance Saved a Revenu Québec Audit

A Montreal small business owner found himself in a stressful and escalating Revenu Québec audit. What began as a simple request for documents quickly turned into accusations of misreporting, threats of penalties, and a proposed reassessment that could have crippled the business. With the right legal support backed by strong CPA documentation the outcome shifted from disaster to complete relief.

This case study shows how a tax lawyer’s intervention changed everything.

The Audit That Went Wrong

The business was selected for a QST verification covering two years.
Within weeks, the auditor identified what they believed were:

• unreported taxable sales
• invalid or missing input tax refunds (ITRs)
• questionable subcontractor expenses
• personal purchases coded as business expenses
• inconsistencies between deposits and revenue

The auditor’s tone quickly shifted from neutral to adversarial.

A draft notice proposed:
• tens of thousands in QST owing
• penalties for “gross negligence”
• interest accumulating daily

The business owner was overwhelmed.

When a Lawyer Becomes Essential

A CPA is enough for most audits but not when:
• penalties are being threatened
• the auditor questions intent
• the auditor refuses to accept documentation
• the auditor is interpreting law incorrectly
• the case risks escalating to prosecution

This case required a tax lawyer immediately.

How the Lawyer Turned the Case Around

Step 1 — Taking Over Communication

The lawyer formally requested that all communication go through legal counsel, preventing misunderstandings and protecting the client’s rights.

Step 2 — Challenging Legal Misinterpretations

The auditor had misapplied several sections of the Quebec Taxation Act relating to:
• taxable supplies
• zero-rated services
• shareholder advances
• business vs. personal expenses

The lawyer provided detailed rebuttals with supporting jurisprudence.

Step 3 — Demanding Procedural Fairness

The lawyer required:
• detailed explanations for each proposed adjustment
• precise legal references for every allegation
• correction of any computational errors

The auditor was forced to re-evaluate the file.

Step 4 — Presenting the CPA-Rebuilt Evidence

Meanwhile, the CPA team:
• reconstructed bookkeeping
• prepared clean ITR schedules
• matched deposits to revenue sources
• documented every questionable transaction

The lawyer submitted this audit-ready binder strategically, item by item.

Step 5 — Negotiating a Resolution

With strong legal argumentation and airtight accounting, the lawyer negotiated:
• removal of all penalties
• reduction of proposed adjustments
• acceptance of corrected documentation
• dismissal of negligence accusations

The Final Outcome

The file closed with:
• no penalties
• significantly reduced reassessment
• no accusations of wrongdoing
• a clean compliance record
• no escalation to court

The business avoided more than $30,000 in potential tax and penalties.

Key Lessons

• When intent or negligence is questioned, legal representation is critical
• CPAs and tax lawyers working together create a powerful audit defense
• Procedural fairness can be invoked when auditors overreach
• Proper documentation and reconstruction change audit outcomes
• Silence is dangerous representation protects your rights

Common Questions

Do I need a lawyer for every audit?
No. Only when the situation becomes legal rather than financial.

Can penalties be removed?
Yes especially with documented good faith and legal support.

What if the auditor refuses evidence?
A lawyer can force them to consider it under the law.

What if my audit already escalated?
It’s not too late intervention can still reverse outcomes.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal partners with top tax lawyers when needed to defend clients against aggressive or misinterpreted audits. We ensure clients receive both financial accuracy and legal protection.