A CRA audit can be stressful for any business owner, but proper preparation significantly reduces risk and disruption. In 2025, the Canada Revenue Agency (CRA) continues to increase audit activity, particularly for Ontario businesses, incorporated companies, freelancers, and independent contractors.

This guide explains what a CRA audit is, why audits happen, how to prepare, and what Ontario taxpayers should expect in 2025.

What Is a CRA Audit?

A CRA audit is a formal review of a taxpayer’s financial records to verify that income, expenses, deductions, and taxes have been reported correctly.

CRA audits can apply to:

• Individuals
• Sole proprietors
• Corporations
• Partnerships
• Non-resident taxpayers

Audits may be conducted remotely, by mail, or in person.

Why the CRA Audits Ontario Businesses More Frequently

Ontario has the highest concentration of:

• Small businesses
• Contractors and freelancers
• Incorporated professionals

As a result, the CRA focuses heavily on:

• HST compliance (Ontario HST 13%)
• Payroll deductions
• Business expense claims
• Income matching with third-party data

Common Types of CRA Audits in 2025

1. Desk (Pre-Assessment) Audit

• Conducted by mail
• Focuses on specific items (expenses, deductions, credits)

2. Post-Assessment Audit

• Conducted after a return is assessed
• May review multiple years

3. HST Audit

• Focuses on HST collected, ITCs claimed, and filing accuracy
• Very common for Ontario businesses

4. Payroll Audit

• Reviews source deductions (CPP, EI, income tax)
• Common for employers and owner-managed corporations

CRA Audit Triggers to Watch in 2025

CRA audits are often triggered by:

• Large or unusual expense claims
• Consistent business losses
• High vehicle or home office expenses
• Mismatched income reports
• Late or amended filings
• Industry-specific risk profiling

How to Prepare for a CRA Audit (Ontario Businesses)

1. Maintain Proper Records

CRA requires records to be kept for at least 6 years, including:

• Bank and credit card statements
• Invoices and receipts
• Payroll records
• HST filings

2. Reconcile Your Books Regularly

Monthly bookkeeping ensures:

• Accurate HST reporting
• Clean audit trails
• Fewer CRA questions

3. Separate Personal and Business Expenses

Mixing expenses is a major red flag in CRA audits—especially for Ontario small businesses.

4. Use CRA-Compliant Bookkeeping Software

Software like QuickBooks Online improves accuracy and audit readiness.

5. Engage a CPA Before CRA Contact

A CPA can:

• Review CRA requests
• Prepare documentation
• Communicate directly with the CRA on your behalf

What to Expect During a CRA Audit

1. Audit notification letter
2. Request for documents
3. CRA review and follow-up questions
4. Proposed reassessment (if applicable)
5. Final audit decision

Audits can take weeks to several months, depending on complexity.

Consequences of a CRA Audit

Possible outcomes include:

• No change (best case)
• Reassessment with taxes owing
• Interest and penalties
• Gross negligence penalties (serious cases)

Proper preparation significantly reduces negative outcomes.

How a CPA Helps During a CRA Audit

An Ontario CPA provides:

• Strategic audit response
• Risk mitigation
• Proper representation
• Reduced stress and disruption
• Strong documentation support

Frequently Asked Questions (FAQs)

How long does a CRA audit take?

Most CRA audits take 30 to 180 days, depending on scope and response time.

Can CRA audit multiple years?

Yes. CRA can audit multiple prior years, especially if issues are identified.

What records does CRA request most often?

Common requests include:

• Bank statements
• Receipts
• Mileage logs
• HST working papers
• Payroll summaries

Can a CPA deal with CRA on my behalf?

Yes. A CPA can fully represent you and communicate directly with the CRA.

Are CRA audits increasing in 2025?

Yes. CRA has increased audit activity, particularly for Ontario businesses and HST registrants.