What Triggers a CRA Audit and How to Avoid Them

The Canada Revenue Agency (CRA) conducts audits to ensure that taxpayers are fulfilling their tax obligations accurately and receiving the benefits and refunds they are entitled to. While most taxpayers comply with tax laws, audits play a crucial role in maintaining the fairness and integrity of Canada’s tax system.

How does the CRA choose a file for an audit?

The CRA uses a risk assessment process to select files for audit. This assessment considers factors such as:

  • Likelihood or frequency of errors in tax returns
  • Indications of non-compliance with tax obligations
  • Information on file for the taxpayer
  • Comparisons to similar files or data from other audits or investigations

What are the common audit triggers?

Based on the information provided by the CRA and TurboTax Canada, here are some common triggers that may increase the likelihood of an audit:

1. Unreported Income:

  • Failing to report all income from T-slips or other sources
  • Discrepancies between reported income and information received by the CRA from employers or other entities

2. Unusually High Credits or Deductions:

  • Sudden and significant increases in claimed credits or deductions
  • Lack of proper documentation or justification for these claims

3. Refusal or Delay in Providing Information:

  • Ignoring or delaying requests for additional information from the CRA
  • Providing incomplete or inaccurate information

4. Excessive Home Office Deductions:

  • Claiming a home office deduction for an unreasonable portion of the home’s space
  • Failing to follow the CRA’s guidelines for home office deductions

5. Questionable Vehicle Expenses:

  • Writing off 100% of a personal vehicle for business use
  • Inflating vehicle-related expenses without proper documentation

6. Overuse of Tax Shelters:

  • Participating in non-profit organizations that raise red flags
  • Inflating donation amounts to questionable charities

7. Rental Property Losses:

  • Consecutive years of claimed losses for a rental property
  • Insufficient documentation to justify the claimed expenses

How to Avoid Audit Triggers:

To minimize the risk of triggering an audit, taxpayers should:

  • Accurately report all income: Keep detailed records of all income sources and ensure they are fully reported on tax returns.
  • Substantiate credits and deductions: Maintain documentation to support all claimed credits and deductions, including receipts, invoices, and logs.
  • Respond promptly to CRA requests: Provide the requested information accurately and on time to avoid escalating the situation.
  • Follow home office deduction guidelines: Calculate the home office deduction based on the actual percentage of the home used for business purposes and adhere to the CRA’s rules.
  • Justify vehicle expenses: Keep a mileage log and receipts for vehicle-related expenses to demonstrate their business necessity.
  • Use legitimate tax shelters: Research and participate in reputable tax shelters and ensure that donations are made to recognized charities.
  • Document rental property expenses: Maintain records of all expenses related to rental properties to support any claimed losses.

Additional Tips:

  • Keep accurate and organized records.
  • Register for CRA My Account to access tax information and reduce the risk of errors or omissions.
  • Amend tax returns promptly if errors are discovered.

By following these guidelines and avoiding common audit triggers, taxpayers can increase their chances of a smooth and hassle-free tax filing experience.


What triggers a CRA audit?

Once an income tax return has been filed, it is subject to both computer and human review. Some tax returns will be audited on a random basis, but most audits are caused by what is in the tax return: the information you supplied and the way you supplied it. Here is a list of eight “red flags” that are likely to trigger an audit by the CRA.

Why does the CRA audit my tax return?

There are many reasons the CRA may audit your tax return, such as random selection, tax history, or types of deductions claimed. It’s important to report all of your income on your tax return. If you are self-employed, be sure to implement good record keeping so you’re ready to provide information if and when the CRA asks for it.

How do I avoid a CRA audit?

If you want to avoid the stress, inconvenience and intrusion of a CRA audit, steering clear of the following triggers will tilt the odds in your favour. There are many reasons the CRA may audit your tax return, such as random selection, tax history, or types of deductions claimed. It’s important to report all of your income on your tax return.

Are You at risk of a CRA audit in Canada?

While those external factors impact the likelihood of a tax audit in Canada, there are other income tax reporting decisions that can also attract scrutiny to your return and possibly trigger a CRA audit. Generally speaking, there are a few categories of taxpayers that are considered at high risk of inaccurate reporting.

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