CRA and Revenu Québec Tax Audits: What to Expect and How to File an Objection

If you live in Quebec, you file two income tax returns: a federal one with the Canada Revenue Agency (CRA) and a provincial one with Revenu Québec. That means two agencies can review or audit you, and each has its own process if you disagree with the result. Here is what to expect from a tax audit, how far back each agency can go, and how to file a notice of objection.

What is a tax audit?

An audit is a closer look at your return to check that what you reported is accurate. It can be done by mail, where you're asked to send receipts or documents, or in the field, where an auditor meets with you or visits your business. Both agencies can ask to see your books, records and supporting documents.

What triggers a tax audit?

Neither the CRA nor Revenu Québec publishes an exact list. Files are often selected because of:

• income or slips that don't match what employers and financial institutions reported
• deductions or credits that are large or unusual for your situation
• business losses year after year
• a business that deals mostly in cash
• information shared between the CRA and Revenu Québec, or received from other sources
• random selection

How a tax audit works, step by step

1. First contact. A letter or call tells you which years and items are being reviewed and what to send.
2. Documents and questions. You send what's requested and answer the auditor's questions.
3. Proposed changes. If the auditor plans to change your return, you usually receive a letter explaining the proposed changes first.
4. Your response. You can send more information or explain why you disagree before the file is closed.
5. Notice of reassessment. The agency issues a new assessment. Its date starts the clock for an objection.

How far back can the CRA and Revenu Québec go?

For individuals, the CRA can normally reassess a return for three years after the date of the original notice of assessment, according to the CRA's guidance on reassessments. That limit doesn't apply when there was a misrepresentation due to neglect, carelessness, wilful default or fraud, or when you signed a waiver. Quebec's Taxation Act sets a similar normal reassessment period for Revenu Québec.

Your rights during an audit

The CRA's Taxpayer Bill of Rights and Revenu Québec's charter of taxpayer rights set out how the agencies must treat you, including your right to be informed, to be treated fairly and to be represented. If you have a complaint about how you were treated, you can contact CRA Service Complaints or Revenu Québec's Bureau de la protection des droits de la clientèle. A complaint doesn't replace an objection and doesn't extend its deadline.

Penalties and interest

If an audit finds unreported income or overclaimed deductions, you'll owe the tax plus interest. Penalties can be added, for example for failing to report income repeatedly or for gross negligence. If you have unreported income and the agency hasn't contacted you yet, the voluntary disclosure programs of the CRA and Revenu Québec may reduce penalties. A tax lawyer can tell you whether you qualify.

You disagree? File a notice of objection

An objection asks the agency to take a fresh look at its assessment. It's handled by an objections or appeals team separate from the auditor.

• CRA: file online through My Account ("Register my formal dispute"), with Form T400A, or by signed letter.
• Revenu Québec: file online through My Account, with form MR-93.1.1-V, or by letter.

The deadline matters. For individuals, both agencies give you whichever is later: 90 days after the date on your notice of assessment, or one year after the filing deadline for that year's return. Other taxpayers generally have 90 days. See the CRA's objection deadlines and Revenu Québec's time limits. If you miss the deadline, you can ask for an extension, but it isn't automatic.

After the objection: going to court

If you still disagree with the decision on your objection:

• Federal income tax: appeal to the Tax Court of Canada.
• Quebec income tax: contest the decision before the Court of Québec, which also has a Small Claims Division. According to Revenu Québec, you have 90 days after its decision.
• GST/HST: even when Revenu Québec handles it, an appeal goes to the Tax Court of Canada.

When to talk to a tax lawyer

Many reviews end once you send the right documents. A tax lawyer is worth calling when:

• the amount at stake is large
• the agency proposes gross negligence penalties
• there's any sign of a criminal investigation
• you want to file an objection or take the case to court

What you tell a lawyer is protected by solicitor-client privilege. What you tell an accountant generally isn't, which matters when the facts are sensitive.

You can compare tax lawyers in Quebec on JustiConnect and book a consultation.

Frequently asked questions

How likely is a CRA audit?

Neither agency publishes odds. Most returns are processed without an audit, and many reviews are simple requests for receipts. The factors listed above make a closer look more likely.

What triggers a CRA audit?

Common reasons include slips that don't match, unusual deductions, repeated business losses, cash businesses, information shared between agencies and random selection.

How far back can the CRA or Revenu Québec go?

For individuals, normally three years after the original notice of assessment. It can be longer in cases of misrepresentation or fraud, or if you signed a waiver.

How long do I have to file an objection?

For individuals, the later of 90 days after the notice of assessment or one year after the filing deadline for that year's return. Other taxpayers generally have 90 days.