CRA Audit vs Review Letter: What's the Difference and How to Respond

The CRA sends different types of letters, and people call all of them “an audit.” They are not the same thing. A review letter is a routine check on specific items, usually processed by a clerk following a script. An audit is a detailed examination of your return by an auditor, often triggered by risk-scoring algorithms or information matching. A request for information is somewhere in between: the CRA wants documents before deciding whether to go further. The response strategy is different for each, the stakes are different, and confusing them causes two problems: over-reacting to a review (hiring expensive counsel for a $200 question) or under-reacting to an audit (sending a casual email when the CRA is building a reassessment case). This page explains what each letter actually means, what the CRA is looking for, and how to respond.

What is a CRA review?

A review is a routine verification of specific items on your return. The CRA processes roughly 3 million reviews per year, covering about 10% of all returns filed. Most are triggered automatically by the CRA’s risk assessment system, which flags returns with claims that deviate from statistical norms for the taxpayer’s profile.

Common review triggers: medical expenses above a certain threshold, charitable donations that are unusually large relative to income, moving expenses, employment expenses claimed without a T2200 on file, rental losses, and first-time business income claims. The CRA selects these returns not because it suspects fraud but because the claims need verification.

The review letter will ask for specific documents: receipts for medical expenses, official donation receipts, a T2200 signed by the employer, rental income and expense statements, or proof of a particular deduction. The letter usually has a deadline (30 days is typical) and a clear list of what is needed.

A review is not an audit. The CRA officer processing the review is working from a checklist. They are not examining your entire return, interviewing you, or visiting your business. If the documents support the claims, the review closes with no change. If the documents are missing or do not support the claim, the CRA will disallow the item and issue a reassessment.

What is a CRA audit?

An audit is a formal examination under section 231.1 of the Income Tax Act, which gives the CRA broad authority to examine books, records, documents, and property. Audits are conducted by auditors (not processing clerks), and they have a wider scope than reviews. The auditor can examine the entire return, request additional years, follow leads into related entities (corporations, trusts, partnerships), and expand the scope if they find issues.

Audit triggers include: significant discrepancies between reported income and lifestyle indicators, tips or informant referrals, risk-scoring algorithms flagging high-risk returns, industry-specific audit programs (the CRA regularly targets cash-intensive businesses, real estate, and the sharing economy), and information received through international exchange agreements (including data from the IRS under Article XXVII of the Canada-US treaty).

The audit letter will identify the years under examination and the general area of focus (business income, foreign income, capital gains, etc.), but the auditor is not limited to that area. If the audit starts with business expenses and the auditor notices unreported rental income, the scope can expand.

For cross-border filers, audits are more likely when the CRA receives information from the IRS that does not match the Canadian return. Common mismatches: US-source income reported to the IRS but not on the Canadian return (or reported differently), foreign property not disclosed on Form T1135, departure-date discrepancies between the Canadian and US returns, and foreign tax credits that do not reconcile with the underlying foreign tax.

How do I tell which one I received?

The letter itself usually indicates whether it is a review or an audit, but not always clearly. Here are the indicators:

Review indicators: The letter asks for specific documents related to specific line items. It comes from the “Processing Review” or “Benefits Validation” unit. It gives a deadline and a list. It does not mention section 231.1 or “examination.” It usually arrives within 6 to 12 months of filing.

Audit indicators: The letter references section 231.1 or says “audit” or “examination.” It comes from the “Audit Division” or names a specific auditor with a direct phone number. It asks for broad categories of records (all business records, all bank statements, all foreign income documentation) rather than specific receipts. It may request a meeting or site visit. It may cover multiple years.

Request for information (grey zone): Some letters do not cleanly fit either category. The CRA may send a “request for information” that looks like a review but has a broader scope, or that is a preliminary step before deciding whether to open a formal audit. Respond to these as you would a review (provide the requested documents promptly), but be aware that the response may trigger an audit if the CRA finds issues.

If you are unsure, call the number on the letter and ask: “Is this a review or an audit?” The officer should be able to tell you, and the distinction matters for your response strategy.

How should I respond to a review?

Promptly and completely. The review is a document check, and the fastest way to close it is to provide exactly what the CRA asks for, with clear labeling.

1. Read the letter carefully. Identify each item the CRA is asking about and each document requested.
2. Gather the documents. If you cannot find a receipt, look for alternative proof (bank statement showing the payment, credit card statement, cancelled cheque, email confirmation).
3. Organize the response. Match each document to the specific item on the letter. If the CRA asks for medical receipts, label each receipt with the line item and the amount.
4. Respond before the deadline. If you need more time, call the number on the letter and ask for an extension. The CRA will usually grant 15 to 30 additional days.
5. Keep copies of everything you send.

Do not send more than what is asked for. If the CRA asks for medical receipts and you send your entire T1, the extra information can open new questions. Answer the question, document the answer, and stop.

If you cannot support a claim (the receipt is lost and no alternative documentation exists), consider whether to concede the item voluntarily. Conceding a $300 medical expense and accepting a minor reassessment is often better than triggering escalation by refusing to respond or by providing weak documentation.

How should I respond to an audit?

More carefully than a review. An audit has broader scope, higher stakes, and a different power dynamic. The auditor is trained to look for inconsistencies, and the scope can expand based on what they find.

Respond to the initial request. Provide the documents the auditor asks for, but do not volunteer additional information or documents that were not requested. Everything you provide becomes part of the audit file.

Consider representation. For complex audits (business income, foreign income, cross-border issues), having a CPA or tax lawyer handle the audit communication reduces the risk of inadvertent admissions. If someone else is communicating with the CRA on your behalf, ensure the Represent a Client authorization is on file.

Know the scope. Ask the auditor what years and what issues are under examination. The auditor should tell you the scope at the outset. If the scope expands later, the auditor should notify you.

Do not lie or conceal. Providing false or misleading information during an audit can trigger a gross negligence penalty under section 163(2) (50% of the tax on the understatement) or, in extreme cases, a criminal referral. If you know that an item on the return is wrong, discuss the situation with a professional before responding.

Do not ignore the audit. If you do not respond, the auditor will issue a reassessment based on the information available, which is usually the worst-case scenario. The CRA’s assumption in the absence of documentation is that the claim is unsupported and should be denied.

What happens after the review or audit?

If the CRA is satisfied with the documentation, it closes the file with no change. You will receive a letter confirming this.

If the CRA disagrees with one or more items, it proposes an adjustment. For a review, this is usually communicated by letter. For an audit, the auditor issues a proposal letter detailing the proposed changes, the reasons, and the amounts. You typically have 30 days to respond to the proposal (provide additional information, contest the findings, or agree).

If the CRA proceeds with the adjustment, it issues a reassessment. The reassessment is the legal instrument that changes your tax for that year. You then have 90 days (or one year from the filing-due date for individuals, whichever is later) to file a notice of objection.

If the reassessment adds penalties, you may be eligible for taxpayer relief. If the CRA begins collection action on the reassessed balance, section 225.1 suspends collection during an active objection.

Can a review turn into an audit?

Yes. If the CRA reviews your medical expense claim and, in the process, notices that your income seems inconsistent with your deductions, the review can be referred to the audit division. This is not common (the processing clerk handling the review would need to escalate it), but it happens. The reverse is also possible: an audit that finds minor issues may be downgraded to a review-level adjustment.

The escalation risk is another reason not to volunteer excess information in a review. If the CRA asks for donation receipts and you provide your full financial statements showing unexplained deposits, you have given the clerk a reason to refer the file.

What should I do next?

Read the letter you received. Determine whether it is a review (specific items, document request, processing unit) or an audit (broad scope, named auditor, section 231.1 reference). Gather the requested documents and respond before the deadline. If it is an audit involving foreign income, business income, or cross-border issues, consider engaging a representative before responding. If the IRS is also auditing the same income, see how to coordinate dual-country audits. If the CRA has used the net worth method to reconstruct your income (common for cash-intensive businesses or when records are incomplete), see CRA net worth reassessment for how to identify errors in the CRA’s math and challenge the assessment.

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.