How to prepare for a CRA review
CRA letters happen. Here is how to respond without panic and without losing money.
Published April 16, 2025 · 6 min read
If you run a Canadian business long enough, you will eventually get a letter from the CRA asking for documentation. Most of these are routine reviews, not audits. The difference between a smooth review and an expensive one comes down to your documentation habits.
Review vs audit
A review is a request for supporting documents on specific claims. They ask for receipts, you send them, life moves on. The vast majority of CRA contact is at this level.
An audit is a more in-depth examination, usually triggered by red flags or random selection. Audits take months and require professional representation.
What CRA typically asks for
Home office: floor plan and utility bills.
Vehicle: mileage log and expense receipts.
Meals and entertainment: receipts plus notes on business purpose.
Professional fees: invoices with detail on what was done.
Travel: tickets, accommodation, expense report tying it to business meetings.
Bad debt: documentation of collection attempts.
Documentation habits that keep you safe
Photograph or scan every business receipt the day it happens. Cloud storage is cheap; lost receipts are expensive.
Note the business purpose on each receipt. A coffee meeting receipt with the name of the person you met saves the deduction.
Run a quarterly habit of categorizing transactions, not a year-end scramble.
Keep all CRA correspondence and your responses for 7 years.
When you get a review letter
Read it carefully. Note exactly what they are asking for and the deadline.
Send only what is asked. Do not volunteer additional documentation that opens new lines of questioning.
Respond on time. Even if you ask for an extension (always granted if reasonable), do not let the deadline lapse.
If amounts are material, loop in your accountant before responding.
The CRA is not the enemy. They are doing routine paperwork verification. The businesses that get hurt are the ones with sloppy documentation, not the ones with aggressive but well-documented deductions. Build the documentation habit and reviews become a non-event.