GST & Tax · Edmonton
CRA audit for small business: what to expect.
A letter from CRA doesn't mean you did something wrong. Here's how reviews and audits actually work, what the auditor will want to see, and how good books make the whole thing shorter.
By the Plum team- Updated Oct 2026
- 9 min read
- Most CRA contact starts with a letter asking you to support a few items.
- Respond by the deadline, send exactly what's asked for, and keep copies.
- CRA can generally reassess income tax within three years, GST within four.
- Reconciled books and organized receipts make an audit shorter and cheaper.
- You have the right to disagree, and to have a representative deal with CRA.
Few envelopes make a business owner's stomach drop like one from the Canada Revenue Agency. But a review or audit isn't an accusation. CRA checks returns for all kinds of reasons, some random, some because a number stood out. If you've been wondering about a CRA audit for small business, what to expect is mostly paperwork, deadlines and questions you can answer if your books are in order.
This guide walks through how audits work for small businesses in Edmonton, St. Albert, Leduc and across Canada, what the auditor will ask for, and how to prepare long before any letter arrives.
1The kinds of CRA reviews and audits
| Type | What it looks like | Typical scope |
|---|---|---|
| Desk review or verification letter | A letter asking for receipts or explanations for specific items | One return, a few lines |
| GST refund review | CRA holds a GST refund until you support your input tax credits | One or more GST periods |
| Correspondence audit | A broader request handled by mail or online | Several areas of a return |
| Field audit | An auditor reviews your books, possibly at your place of business | Often more than one year and more than one tax |
| Payroll audit | A review of source deductions, slips and worker classification | Payroll accounts and T4s |
Most small businesses that hear from CRA get the first two. They're usually resolved by sending the right documents with a short, clear explanation.
2CRA audit for small business: what to expect, step by step
1. The first letter
It names the tax (income tax, GST or payroll), the period, and what CRA wants. It also gives you a deadline, often around 30 days. Read it twice, note the deadline and the auditor's contact details, and check that the letter is genuine through My Business Account.
2. Gathering the documents
Typical requests include:
- Bank and credit card statements for the period
- Sales invoices and a sales summary that ties to your return
- Receipts and invoices for specific expenses or input tax credits
- Your general ledger and trial balance
- A vehicle logbook if you claimed vehicle expenses
- Home office calculations and supporting bills
- Contracts, loan documents and asset purchase invoices
Send what's asked for, organized and labelled. Don't send boxes of everything. If you need more time, ask before the deadline; auditors will often give an extension when you ask early.
A few habits make your response smoother:
- Answer the question asked. Sending unrelated documents can open new questions.
- Label everything. Match each receipt to the transaction it supports, with a short summary page on top.
- Explain briefly. If a number looks odd, like a large equipment purchase or a one-off contract, two lines of context help.
- Send copies, not originals, and record what you sent and when.
- Upload through My Business Account where the letter allows it, so there's a clear timestamp.
If you're a new GST registrant expecting a refund, don't be alarmed if CRA asks to see invoices before releasing it. Refund reviews are routine, and they're usually quick when your input tax credits are well documented.
3. Questions and follow-up
The auditor may come back with questions, or for a field audit, meet with you and walk through how your business runs. Answer honestly and stick to the question. If you don't know, say you'll find out.
4. The proposal letter
Before finalizing anything, CRA usually sends a proposal explaining any adjustments and gives you a chance to respond with more information. This is your best moment to fix misunderstandings.
5. The reassessment
CRA issues a notice of reassessment showing any changes, tax owing, interest and penalties. If nothing changes, you'll get a letter saying so.
3How far back CRA can look
- Income tax: generally three years from the date of your notice of assessment for individuals and Canadian-controlled private corporations. Other corporations generally have a longer window.
- GST: generally four years from when the return was due or filed.
- No time limit where CRA finds misrepresentation due to carelessness, neglect or wilful default, or where no return was filed.
That's separate from how long you must keep records: six years from the end of the last tax year they relate to. Our guide on how long to keep business records covers the details, including what counts as an acceptable digital copy.
4What tends to draw CRA's attention
CRA doesn't publish a checklist, and plenty of audits are random. But reviews often focus on areas where mistakes are common:
- Large or growing GST refunds, especially for a new registrant.
- Vehicle, meals and home office claims that look high for the business.
- Cash-heavy businesses where sales are harder to verify.
- Personal expenses run through the business, or shareholder loans that never get repaid.
- Mismatches between slips, GST returns and income tax returns.
- Contractors who look like employees.
The best defence for all of these is the same: claim what's real and keep the proof. A realtor with a proper mileage log, for example, is in a far stronger position than one estimating. See our guide to vehicle logs CRA accepts.
5Make your books audit-ready now
6Your rights during an audit
CRA's Taxpayer Bill of Rights says you're entitled to be treated professionally and courteously, to receive complete and timely information, and to have a representative of your choice. You can authorize your accountant or bookkeeper to deal with CRA for your business through My Business Account.
If you disagree with a reassessment, you can generally file a notice of objection within 90 days. If you discover past errors yourself before CRA contacts you, CRA's Voluntary Disclosures Program may reduce penalties and interest. Both are areas where your accountant's advice is worth having.
If your books are behind, the time to fix them is before a letter arrives. Plum does catch-up bookkeeping for businesses in Edmonton, St. Albert and Leduc, and can help you pull together what an auditor needs. Book a free 15-minute call to talk it through.
7Questions people ask
How far back can CRA audit a small business?
For income tax, CRA can generally reassess within three years of your notice of assessment for individuals and Canadian-controlled private corporations. For GST, it's generally four years. There's no limit where CRA finds misrepresentation from carelessness, neglect or fraud.
What does CRA look at in a small business audit?
Usually your sales records, bank statements, invoices and receipts for expenses, and anything unusual on your return, like a large home office, vehicle or meals claim. For GST audits they'll compare GST collected and claimed to your books.
How long does a CRA audit take?
A simple desk review by letter can be resolved in weeks once you send the documents. A field audit can take months, depending on how organized your records are and how many years are being reviewed.
Can I disagree with the result of a CRA audit?
Yes. You can respond to the auditor's proposal before it's finalized, and once a reassessment is issued you generally have 90 days to file a notice of objection. Your accountant can help you decide whether it's worth it.
Is a CRA review the same as an audit?
Not quite. Many reviews are simple requests to support one or two items on a return, often done by mail. A full audit is broader and may involve an auditor examining several years of your books, sometimes at your place of business.
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Book a free 15-min callThis article is general information for Alberta businesses and isn't tax or legal advice. Rules and thresholds change, so confirm your situation with your accountant or CRA.