What Happens If You Ignore a CRA Audit Request? – A Complete Guide by a Montreal CPA Firm Near You

Introduction

Receiving a CRA audit letter is stressful—but ignoring it is the worst possible response. Many taxpayers freeze out of fear, confusion, or lack of documentation. Some hope the issue will “go away.” It never does. Ignoring a CRA audit request almost always leads to aggressive reassessments, penalties, interest, collections, and in severe cases, legal consequences. This guide explains exactly what happens if you ignore a CRA audit request, what CRA is legally allowed to do, and how to protect yourself before the situation escalates.

Legal and Regulatory Framework

CRA audit powers are granted under the Income Tax Act, the Excise Tax Act (GST/HST), and the Tax Administration Act (Quebec). CRA has the right to request books and records, question transactions, demand supporting documents, review banking information, and reassess tax returns. If a taxpayer ignores an audit request, CRA is authorized to reassess based on its own assumptions. CRA may also escalate the case to Collections, issue a Requirement for Information, freeze bank accounts, garnish wages, or pursue penalties.

Key Court Decisions

In R. v. Ling, the Supreme Court affirmed CRA’s authority to use indirect methods such as bank deposit analysis when taxpayers do not cooperate. In Stemijon Investments v. Canada, the Federal Court of Appeal highlighted CRA’s broad audit powers and the requirement for taxpayers to maintain records. In Guindon v. Canada, penalties for false statements were upheld, reinforcing the consequences of non-cooperation. These cases show that ignoring CRA is legally and financially risky.

What CRA Does When You Ignore an Audit Request

1. Issues a Second and Final Request

CRA will usually send a reminder letter giving a short deadline. Failure to respond increases suspicion.

2. Makes Assumptions About Your Income

CRA may perform a net worth audit, bank deposit analysis, or industry markup calculation. These methods often overstate income.

3. Reassesses Without Documentation

CRA will issue a Notice of Reassessment based entirely on assumptions. You lose the benefit of explaining legitimate expenses or correcting errors.

4. Applies Penalties

Expect:

• Late-filing penalties

• Repeated failure to report penalties

• GST/HST penalties

• Payroll penalties

• Gross negligence penalties (50% of tax) if CRA believes non-cooperation was intentional

5. Adds Daily Compounded Interest

Interest begins immediately and increases rapidly.

6. Transfers File to Collections

CRA Collections may freeze bank accounts, garnish wages, seize refunds, and redirect receivables.

7. Expands the Audit

CRA may open additional years, audit business associates, or review related corporations or family members.

8. Refers the Case for Criminal Review (Rare but Possible)

Serious cases involving large unreported income or offshore assets may be escalated to CRA’s Criminal Investigations Program.

Why Taxpayers Ignore CRA Audit Requests

Common reasons include: fear, missing records, bookkeeping errors, lack of tax knowledge, misunderstanding deadlines, change of address, illness, or belief that CRA will “forget.” CRA does not forget—unanswered letters create red flags.

What You Should Do Immediately Instead of Ignoring the Audit

1. Contact a CPA Immediately

A professional can communicate with CRA on your behalf, preventing misstatements and escalation.

2. Request More Time if Needed

CRA often grants extensions if requested professionally and early.

3. Start Gathering Documents

Collect receipts, invoices, bank statements, merchant reports, contracts, and bookkeeping files.

4. Provide Only What CRA Requests

Submitting unnecessary documents can expand the audit.

5. Maintain Professional Communication

Clear, timely communication reduces reassessment risk.

If You Already Ignored CRA’s First Letter

1. Respond Immediately

Delays worsen your credibility; responding quickly can still save your file.

2. Request Audit Reconsideration

If CRA issued assumptions, an auditor may reconsider if documentation is provided early enough.

3. Prepare for a Reassessment

If reassessed, you may dispute it through a Notice of Objection within 90 days.

4. Consider Taxpayer Relief

If penalties were issued due to personal hardship, relief may be available.

If CRA Has Already Issued a Reassessment

1. File a Notice of Objection

This stops income tax collections and triggers an independent review.

2. Provide full documentation to CRA Appeals

You may still win—Appeals often overturn aggressive audit assumptions.

3. Escalate to Tax Court if Needed

If Appeals does not resolve it, Tax Court provides an independent judgment.

Mackisen Strategy

At Mackisen CPA Montreal, we intervene immediately when clients receive audit requests—or when they have already ignored them. We take over communication with CRA, request extensions, prepare organized document packages, challenge auditor assumptions, file Notices of Objection when needed, and protect clients from unfair reassessments or penalties. We have successfully overturned numerous reassessments created because taxpayers ignored initial CRA letters.

Real Client Experience

A Montreal contractor avoided a $95,000 reassessment after ignoring CRA’s first letter by submitting complete records through our intervention. A restaurant owner reversed denied ITCs and unreported cash assumptions. A crypto investor avoided gross negligence penalties after we reconstructed wallet histories. A landlord reinstated rental expenses after CRA reassessed due to lack of response.

Common Questions

Will CRA drop the audit if I ignore it? No—ignoring will worsen it. Can CRA reassess without documents? Yes—and they often do. Can CRA freeze my bank account for ignoring them? Yes—after reassessment and collections transfer. Can I salvage my file after ignoring CRA? Yes—with immediate action.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal protects taxpayers from harsh reassessments caused by ignored CRA letters. We respond strategically, rebuild documentation, and defend your rights at every stage.