If you operate in Toronto, Scarborough, Markham, Mississauga, Brampton, Vaughan, Richmond Hill, North York, Pickering, Ajax, Whitby, Oshawa, Oakville, Burlington, or Hamilton, you already juggle customers, payroll, and cash flow. A CRA audit or review can derail all of that—usually for avoidable reasons. Below are 17 of the most frequent CRA audit and review triggers for small businesses, explained in plain language with descriptive Pain Points, Pro Tips, and how the right tools help you fix them before they become costly.
Why This Matters
CRA increasingly uses risk-based selection and data-matching (e.g., comparing your return to bank/processor slips, T-slips, platform economy data). Clean books, provable documents, and timely filings won’t make you “invisible,” but they shorten reviews, preserve ITCs, and reduce CRA penalties and interest.
1) Incomplete or Inconsistent Business Income
CRA Audit Trigger: Sales recorded in your POS or e-commerce platform don’t match deposits hitting the bank. Cash sales aren’t recorded every time. Personal and business funds are mixed. On review, totals don’t reconcile, and you can’t clearly explain variances.
Pro Tip: Use separate business accounts only. Map each sales channel (POS, marketplace, website, subscriptions) to a clear chart of accounts. Run weekly / monthly bank reconciliations and a month-end close (P&L, balance sheet, bank recs, AR/AP aging). Keep notes on any one-off adjustments. Consult a Toronto CPA accountant for help with CRA audit/review and for reporting business income accurately.
How Tools Help: Cloud accounting + bank feeds align invoices, payouts, and deposits; POS/e-commerce integrations reduce manual rekeying; management reports make variances obvious early.
2) Late or Incorrect GST/HST Registration & Filing
CRA Audit Trigger: You exceed the small-supplier threshold or start shipping to other provinces but delay registration, apply wrong rates, or miss filing and payment dates—triggering interest/penalties.
Pro Tip: Confirm registration status before crossing thresholds. Configure the correct destination-based GST/HST rates in your checkout/POS. Calendar filing/remittance dates and archive every return with the supporting tax reports. Consult a Toronto tax accountant for help with GST/HST registration and filing.
How Tools Help: Tax centre modules track collected tax, file/prepare returns, and preserve an audit trail; sales-tax apps handle multi-province complexity.
3) Weak Support for Input Tax Credits (ITCs)
CRA Audit Trigger: Receipts are missing, vendor invoices lack mandatory details, or there’s no proof of business purpose. When CRA asks, the ITCs don’t stand up and get denied.
Pro Tip: Capture receipts the day they happen, attach the image to the matching transaction, and reconcile monthly. Make sure invoices include vendor legal name, GST/HST number (where required), date, description, tax amount, and total. Engage a Toronto small business bookkeeper to help you maintain supporting documents for ITCs.
How Tools Help: Receipt-capture apps scan and store documents with transactions; document attachments inside your ledger create a permanent, searchable trail.
4) Payroll Deduction Errors & Late Remittances
CRA Audit Trigger: Manual spreadsheets cause under/over-withholding, missed remittance deadlines, or year-end T4/T4A slip errors. These trigger penalties and additional scrutiny.
Pro Tip: Automate payroll calculations, set remittance reminders, and reconcile payroll liability accounts monthly. Build a simple payroll calendar everyone follows. Consult a payroll processor Toronto to help you set up the payroll properly.
How Tools Help: Payroll systems such as WagePoint or QuickBooks Payroll compute source deductions, schedule remittances, and produce year-end slips reliably.
5) Owner Compensation & Shareholder Loans
CRA Audit Trigger: Unplanned owner draws, personal expenses run through the business, or untracked shareholder loans look like unreported income/benefits and confuse year-end tax positions.
Pro Tip: Decide a salary/dividend policy annually. Post owner draws properly and reconcile the shareholder-loan account monthly. Document how and why amounts moved. Get advice from your corporate tax accountant Toronto to categorize them correctly.
How Tools Help: Equity and loan sub-ledgers keep postings clean; month-end checklists prevent balances from drifting.
6) Repeated Losses or Unreasonable Expenses
CRA Audit Trigger: Multiple loss years, high meals/entertainment claims, or expense categories out of step with the business raise “reasonableness” flags.
Pro Tip: Tie claims to revenue activities. Apply the 50% rule on meals/entertainment. Annotate who/why for meetings and travel. If losses persist, document the business rationale and corrective plan. Ask a Toronto business tax accountant for a reasonableness test.
How Tools Help: Analytics/KPI dashboards spot outliers before filing so you can fix or explain them in your working papers.
7) Vehicle Expenses Without a Logbook
CRA Audit Trigger: You claim fuel, insurance, and maintenance but can’t produce a credible mileage log to support the business-use percentage.
Pro Tip: Keep a 12-month baseline logbook, then maintain quarterly sample logs (accepted approach) and retain all vehicle bills and insurance docs.
How Tools Help: Mileage apps such as MileIQ and document attachments in your ledger preserve records for six years.
8) Home-Office Claims Without Eligibility Evidence
CRA Audit Trigger: You claim a workspace at home but don’t meet the criteria or lack proof of exclusive/regular business use.
Pro Tip: Ensure the workspace is your principal place of business or used exclusively and regularly to meet clients. Keep a floor plan/square-footage note, photos, and utility/tax bills. Check this with your corporate tax accountant Canada.
How Tools Help: Digital folders/year-end binders keep calculations, photos, and bills together for quick response.
9) E-commerce & Multi-Province Sales Tax Gaps
CRA Audit Trigger: Marketplace and DTC orders ship nationwide, but rates/rules aren’t configured correctly, leading to under-collection and back-filings.
Pro Tip: Map where you have obligations. Configure province-specific tax per destination. Export monthly tax reports and tie them to filed returns. Consult your ecommerce accountant Canada.
How Tools Help: E-commerce connectors such A2X sync orders and tax to your ledger; sales-tax automation simplifies multi-jurisdiction rules.
10) Cash-Intensive Operations Without Daily Controls
CRA Audit Trigger: Restaurants, trades, salons, or convenience stores with cash float errors, missing Z-reports, or deposits that don’t match cash-up sheets attract targeted programs.
Pro Tip: Ring every sale, reconcile POS totals to bank daily, use numbered receipts, and log voids/discounts with initials and reasons. Ask your retail business accountant Toronto how you can maintain these controls.
How Tools Help: POS→accounting summaries and daily cash-up checklists establish a clean, repeatable trail.
11) Third-Party Slip Mismatches (T4/T5/T4A/T5018)
CRA Audit Trigger: CRA matches your return to slips from banks, payroll, and payers. Missing or mismatched amounts trigger reviews or reassessments.
Pro Tip: Before filing, collect all slips and reconcile them to your general ledger. Correct any discrepancies immediately and keep copies with the return. Consult a Toronto accountant experienced dealing with CRA audit and review.
How Tools Help: Year-end binders and close checklists ensure slips agree to your books.
12) Over-Claimed ITCs on Meals, Travel & Entertainment
CRA Audit Trigger: Claiming full ITCs on categories with limits or no valid documents is a common review failure.
Pro Tip: Apply the correct allowable percentages, keep itemized receipts, and note the business purpose. Consult a corporate tax professional Toronto for the allowable limits.
How Tools Help: Receipt capture preserves itemization; rules in your ledger route transactions to the right accounts and tax codes.
13) Capital Asset & CCA Class Errors
CRA Audit Trigger: Vehicles/equipment are booked to the wrong CCA class, assets are expensed by mistake, or personal items are claimed—distorting taxable income.
Pro Tip: Maintain an asset register, set a capitalization threshold, and review CCA classes/methods annually. A small business accountant Canada can assist you with this.
How Tools Help: Fixed-asset modules track additions, classes, CCA, and disposals with schedules ready for tax.
14) Missed Corporate Tax Instalments
CRA Audit Trigger: Instalments sneak up on you, causing interest/penalties and signalling weak compliance.
Pro Tip: Forecast quarterly taxes, move funds into a tax-reserve account, and schedule installment payments in advance.
How Tools Help: Budget/cash-flow planners surface upcoming outflows; payment automation prevents missed dates.
15) Poor Record Retention & Disorganized Support
CRA Audit Trigger: You can’t produce invoices, contracts, or receipts when asked, or records are scattered across emails and paper. Audits drag on and deductions/ITCs get denied.
Pro Tip: Keep digital copies for at least six years, attach documents to transactions, and maintain a year-end binder (financials, returns, schedules, key contracts).
How Tools Help: Document storage + attachments inside your ledger create a single source of truth.
16) Related-Party Transactions Without Paper Trails
CRA Audit Trigger: Paying rent to a shareholder’s company, intercompany transfers, or reimbursements without agreements or FMV support look like benefits or disguised distributions.
Pro Tip: Put written agreements in place, record fair-market rates, issue invoices, and keep payment proofs.
How Tools Help: Recurring journals with supporting documents attached keep context clear for reviewers.
17) Platform Economy & Digital-Platform Reporting
CRA Audit Trigger: You earn through platforms (marketplaces, short-term rentals, gig apps) but under-report income, misapply GST/HST rules, or ignore new platform information-reporting requirements.
Pro Tip: Reconcile platform payouts to your books, understand whether GST/HST applies, and retain platform tax statements. Consult a Toronto CPA accountant experienced dealing with digital platform economy businesses in Canada.
How Tools Help: Platform connectors bring payout statements into your ledger; tax centre helps apply the right GST/HST treatment and archive returns.
Recommended Tech Stack (Lean & Practical)
- Cloud ledger (bank feeds, tax centre, fixed assets, document attachments)
- Receipt capture (mobile scans, email-in, OCR)
- Payroll (automated calculations, scheduled remittances, T-slips)
- Payments/AP/AR (online invoices, reminders, scheduled vendor payments)
- E-commerce/Marketplace connectors (order/tax sync, monthly tax reports)
- Analytics/KPIs (gross margin, AR days, cash conversion cycle, variance)
Tip: Choose one core ledger and only add apps that solve a specific, measured problem. Enforce MFA, role-based access, and regular backups.
Audit Triggers & Pro Tips — Summary Table
| # | Trigger | What It Means | Practical Solution | Helpful Tools |
| 1 | Income gaps | Your POS/e-comm totals don’t match bank deposits; cash not recorded consistently | Separate business banking; weekly bank recs; month-end close with reports and variance notes | Cloud accounting + bank feeds; POS/e-comm integrations |
| 2 | GST/HST setup & filing errors | Registered late, wrong rates, missed filings/remittances | Confirm registration; configure destination rates; calendar filings; archive returns + reports | Tax-centre module; sales-tax automation |
| 3 | Weak ITC support | Receipts/invoices missing details; no proof of business purpose | Capture receipts day-of; attach images to transactions; monthly reconciliation | Receipt-capture app; document attachments |
| 4 | Payroll remittance issues | Under/over-withholding; late remits; T-slip errors | Automate payroll; schedule remits; reconcile liability accounts monthly | Payroll system; due-date reminders |
| 5 | Owner draws/loans | Untracked draws look like benefits or unreported income | Annual salary/dividend plan; reconcile shareholder loan; document movement | Equity/loan sub-ledger; month-end checklist |
| 6 | Losses/unreasonable expenses | Multiple loss years or high M&E claims raise flags | Tie expenses to revenue; apply 50% rule; annotate business purpose | KPI dashboard; categorized expense rules |
| 7 | Vehicle claims w/o logbook | No credible mileage log to support business-use % | 12-month baseline log; quarterly samples; keep fuel/insurance bills | Mileage app; document storage |
| 8 | Home-office claims w/o proof | Eligibility/use not demonstrated | Confirm criteria; keep floor plan/photos; store utility/tax bills | Digital binder; attachments in ledger |
| 9 | Multi-province e-comm tax | Destination rates not applied; under-collection | Map obligations; configure rates; export monthly tax reports | E-commerce connectors; sales-tax app |
| 10 | Cash-intensive controls | No daily cash-up; Z-reports missing; deposits don’t tie | Ring every sale; daily POS→bank match; log voids/discounts | POS summaries; daily checklist |
| 11 | Slip mismatches | T4/T5/T4A/T5018 don’t match your GL | Collect all slips; reconcile to GL; correct before filing | Year-end binder; reconciliation workflow |
| 12 | Over-claimed ITCs | Full ITCs claimed on restricted items; weak docs | Apply correct %; keep itemized receipts; note purpose | Receipt capture + rules; tax-code mapping |
| 13 | CCA/class mistakes | Wrong class or expensed assets distort income | Asset register; capitalization policy; annual class review | Fixed-asset module; schedules |
| 14 | Missed instalments | Interest/penalties signal weak compliance | Forecast quarterly; create tax reserve; auto-pay instalments | Budget/cash-flow planner; payment automation |
| 15 | Poor retention | Can’t produce support within six years | Keep digital copies 6+ years; attach to entries; year-end binder | Document storage; attachments |
| 16 | Related-party w/o docs | No lease/invoice/FMV support | Written agreements; FMV notes; recurring entries with support | Recurring journals; doc attachments |
| 17 | Platform reporting | Under-reported platform income or missed info-returns | Reconcile platform payouts; confirm GST/HST rules; store platform tax docs | Platform connectors; tax-centre archive |
Real-Life Examples
- East York café (cash-intensive): Daily cash-ups weren’t matched to bank deposits; Z-reports went missing. They set a daily POS→bank routine and stored Z-reports with deposits. Result: deposits match sales, and monthly closes take 3 days instead of 10.
- Ajax HVAC contractor (payroll): Remittances were repeatedly late. Implemented automated payroll with scheduled remits and a month-end payroll reconciliation. Penalties stopped, and CRA stopped sending warning letters.
- Scarborough e-commerce retailer (multi-province GST/HST): Shipped nationwide using one tax rate. They mapped destination-based rates, synced orders to the ledger, and exported monthly tax reports that tie directly to filings. Month-end reduced from nine to four days.
- North York fitness studio (related-party rent): Paid rent to a shareholder company with no lease or FMV support. They finally used a simple written lease, set recurring entries with the lease attached, and cleaned up prior postings—reducing exposure in any CRA review.
FAQs – CRA Audit / Review Triggers and Pro Tips
1) How does CRA decide whom to audit or review?
CRA blends risk-based selection with data-matching (bank/processor statements, T-slips, platform reports). Patterns like mismatched slips, repeated losses, or unusual ratios can flag a file. Clean, consistent books and documents won’t guarantee avoidance, but they usually mean faster resolution.
2) What records do I have to keep—and for how long?
Keep all books and supporting documents—invoices, receipts, contracts, bank statements, payroll reports, GST/HST returns—for at least six years after the end of the tax year. Digital copies are fine if they are clear, complete, and accessible.
3) When must I register for GST/HST?
Register when you exceed the $30,000 small-supplier threshold or earlier if it makes sense (e.g., to claim ITCs). Once registered, you must collect, file, and remit GST/HST at the correct rate based on where your customer is.
4) How do I avoid losing ITCs during a review?
Every ITC needs proper documentation: supplier details (incl. GST/HST number when required), date, description, taxable amount, tax charged, and proof of business use. Capture receipts immediately and attach them to transactions so nothing is missing later.
5) Why is payroll such a common audit issue?
Because manual payroll leads to calculation errors and late remittances. Use automated payroll, calendar remittance dates, and reconcile payroll liabilities monthly to catch issues early.
6) What’s the safest way to claim vehicle expenses?
Maintain a 12-month baseline logbook, then use sample logbooks (accepted approach) to project business-use %. Keep fuel/maintenance/insurance receipts and link them to the vehicle file. You can use mobile apps such as MileIQ for maintaining clean CRA-compliant logbooks.
7) Can I claim a home office?
Yes—if it’s your principal place of business or a space you use exclusively and regularly to meet clients. Keep a simple floor-plan calculation, photos, and the utility/property tax bills to support your claim.
8) We sell across provinces—how do we manage different tax rates?
Configure destination-based rates in your POS/e-commerce, and export monthly tax reports that tie to filed returns. Keep a one-page map of where you collect which rate for clarity.
9) What is a “matching review”?
CRA compares your return to third-party data (slips, banks, platforms). If amounts don’t match, they ask for explanations. Maintaining a year-end binder with all slips and reconciliations dramatically speeds up your response.
10) I found an old mistake—what should I do?
Fix it promptly. Depending on the case, you may file an amended tax return or discuss options with your tax accountant. Early, transparent correction typically reduces penalties and interest.
Consult a Small Business Accountant Toronto to help you avoid these CRA audit triggers.
Your strongest audit defense is systems, not stress: clean books, provable documents, and on-time filings.
If your numbers can’t tell a clear story, the CRA will write one for you.
Let’s make your story unmistakable. Schedule a Consultation for CRA Audit-readiness Check with MAQ CPA firm’s tax accountant Toronto. We’ll review your GST/HST setup, payroll remittances, ITC documentation, and monthly close—and a plan to reduce audit risk.
Disclaimer
The information provided in this blog is for general informational purposes only and does not constitute professional accounting, tax, financial, or legal advice. While we strive to ensure the accuracy and timeliness of the content, the information may not apply to your specific situation or reflect the most current legislative changes. Readers are strongly advised to consult a qualified professional before making any decisions based on the content of this blog. MAQ CPA and its representatives disclaim any liability for any loss or damage incurred as a result of reliance on any information provided herein.