CRA Audit Guide for Self-Employed Canadians: What to Expect and How to Prepare
A CRA audit of a self-employed return doesn't have to be catastrophic. Here's what actually happens, what they look for, and how strong documentation protects you.
Marcus Chen
Tax Specialist
Self-employed Canadians are audited at roughly twice the rate of employees. Most 'audits' are actually desk reviews — a CRA officer asks for documentation on specific claims. Full field audits (where an officer visits your business) are less common and typically reserved for higher-income businesses or multiple years of inconsistency.
What Triggers a CRA Review
- Expense-to-income ratios that differ significantly from industry norms
- Large year-over-year swings in income or expense categories
- Vehicle expense claims implying near-100% business use
- Home office claims in excess of 20% of home costs (attracts scrutiny, not automatically wrong)
- Repeated net business losses — the CRA may question whether it's a genuine business
- Third-party information (T4A slips from clients) that doesn't match your reported income
What the CRA Actually Asks For
A typical desk review requests: bank statements for the year, credit card statements showing business purchases, receipts for specific expense claims (often the largest ones or entire categories), mileage logbooks, and home office calculations. You typically have 30 days to respond.
How to Respond Effectively
- Respond by the deadline — extensions are available but must be requested proactively
- Provide exactly what was requested, organized and clearly labelled
- Don't volunteer information beyond what's requested
- If a specific receipt is missing, provide the best available substitute: bank record + vendor confirmation
- Consider engaging a tax professional for any audit involving more than $10,000 in disputed deductions
The best audit preparation happens 12 months before any contact arrives. A digital archive of all receipts, a proper mileage logbook, and a reconciled expense report means a 30-day response deadline is manageable — not a crisis.