How to Respond to a CRA Audit Letter (with Sample Responses) – A Complete Guide by a Montreal CPA Firm Near You

Introduction

Receiving a CRA audit letter can be intimidating—even if you’ve done nothing wrong. The way you respond in the first 10 days can determine whether the audit stays small, escalates into a multi-year review, or results in penalties. Many taxpayers panic, ignore the letter, or send incomplete documents that trigger deeper scrutiny. This guide explains exactly how to respond to a CRA audit letter, what documents CRA expects, what to avoid, and includes sample response templates for individuals, small businesses, landlords, investors, and corporations.

Legal and Regulatory Framework

CRA’s authority to conduct audits comes from the Income Tax Act, Excise Tax Act (GST/HST), Quebec Taxation Act, and CRA audit policies. CRA may request records, books, receipts, supporting documents, bank statements, invoices, contracts, payroll files, mileage logs, and digital accounting records. You must respond within CRA’s deadlines or risk reassessment based on assumptions. CRA can audit up to three years, or indefinitely if it alleges misrepresentation or negligence.

Key Court Decisions

In Stemijon Investments v. Canada, the Federal Court of Appeal confirmed CRA’s broad audit powers. In R. v. Ling, the Supreme Court confirmed CRA’s right to use indirect verification methods such as bank deposit analysis and net-worth audits. In Guindon v. Canada, penalties were upheld for false statements—showing the importance of accurate documentation. These cases reinforce the need to respond carefully and professionally to CRA requests.

What a CRA Audit Letter Typically Includes

Most CRA audit letters will indicate: the year(s) under review, the specific items being audited (income, expenses, GST/HST, payroll, real estate, capital gains), the documents required, the audit start date, the auditor’s contact information, and the deadline for providing documents (usually 10–30 days). The letter may also include a request for an initial phone interview—this should be handled cautiously and preferably by your CPA.

Do’s When Responding to a CRA Audit Letter

Respond before the deadline, acknowledge receipt of the letter, contact a CPA immediately, provide only the requested documents, organize records clearly, maintain a professional tone, keep copies of everything submitted, and ensure all documents tie back to amounts reported on your tax return.

Don’ts When Responding to a CRA Audit Letter

Do not ignore the letter, do not call CRA without representation, do not volunteer extra information, do not provide estimates or missing receipts, do not send personal bank accounts unless requested, and do not argue or debate the law at this stage. Poor responses escalate the audit unnecessarily.

Required Documentation by Audit Type

Employment Expense Audit

T2200, receipts, mileage logs, home office calculations, proof of employment requirement.

Self-Employed / Business Audit

Income records, invoices, expense receipts, bookkeeping files, bank statements, GST/HST returns, payroll records.

Rental Property Audit

Lease agreements, mortgage statements, property tax bills, repairs vs capital improvements, receipts, utilities, condo fees, CCA schedules.

Real Estate Audit

Purchase and sale agreements, renovation invoices, proof of intention (capital vs business), assignment documents, GST housing rebate evidence.

GST/HST Audit

Sales journals, ITC documentation, invoices, receipts, e-commerce platform reports (Shopify, Stripe, PayPal, Amazon), bank deposits.

Payroll Audit

T4 summaries, payroll journals, employee contracts, CPP/EI remittances, ROEs, worker classification documentation.

Sample Responses to CRA Audit Letters

Below are model templates following the Mackisen CPA style. These must be customized based on your situation.

Sample Response – Individual / Employment Audit

Subject: Response to CRA Audit Request – [Tax Year] – [Your Name]
Dear [Auditor Name],
I acknowledge receipt of your letter dated [date].
Attached are the documents requested regarding my employment expenses for [year], including the signed T2200, detailed mileage log, receipts for supplies, home office calculations, and supporting proof of employment requirements.
Should you need additional clarification or documentation, please contact me through my representative, Mackisen CPA Montreal.
Sincerely, [Your Name]

Sample Response – Small Business Audit

Subject: CRA Audit – Documentation Submission for [Business Name], [BN Number]
Dear [Auditor Name],
Please find attached the complete documentation requested in your audit letter dated [date], including: income summaries, invoices, expense receipts, bank statements, GST/HST filings, and bookkeeping reports for the period under review.
All communication regarding this audit will be handled through Mackisen CPA Montreal.
Thank you, [Your Name], Owner, [Business]

Sample Response – Rental Property Audit

Subject: CRA Rental Review – Supporting Documents for [Address], [Year]
Dear [Auditor Name],
Attached are copies of mortgage statements, lease agreements, property tax bills, utilities, repair invoices, and the CCA schedule related to the rental property under review.
If further documents are required, please contact my CPA representative.
Regards, [Your Name]

How to Protect Yourself During the Audit

Ensure all numbers reconcile with bank deposits, avoid contradicting previous filings, answer everything through your CPA, keep communications factual, and provide strong documentary support for every claim. Never guess, speculate, or recreate receipts.

If You Disagree with CRA’s Findings

You will receive a proposal letter first. At this stage, your CPA can: provide rebuttal documentation, draft a written response, challenge CRA assumptions, escalate to senior auditors, or negotiate adjustments. If CRA issues a reassessment that is still incorrect, you may file a Notice of Objection within 90 days.

Mackisen Strategy

At Mackisen CPA Montreal, we take control of the audit process from day one. We communicate with CRA on your behalf, prepare complete documentation packages, rebut incorrect CRA conclusions, and ensure all responses are legally and strategically sound. Our involvement dramatically reduces reassessment risk.

Real Client Experience

A Montreal graphic designer passed a home-office audit after we provided detailed logs. A contractor avoided gross negligence penalties during a business audit due to our documentation strategy. A landlord overturned a proposed reassessment after we challenged CRA’s capital-vs-repair interpretation. A corporation passed a GST/HST audit after we reconciled Shopify and PayPal reports.

Common Questions

Can I handle an audit myself? Possible, but risky. Can CRA audit multiple years? Yes. Will CRA accept digital receipts? Yes—if clear. Does responding quickly help? Yes—CRA values cooperation and clarity.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps taxpayers respond to CRA audit letters with precision, professionalism, and strong documentation. We protect your rights, reduce reassessment risk, and guide you through every step of the audit process.