Avoiding a CRA audit for your business: 4 ways to reduce your risk

As an accountant who is also a business owner, I know that avoiding a CRA audit for your business is about more than just following the rules—it’s about understanding what raises red flags. In this post, I share four practical ways to stay compliant, reduce audit risk, and keep your focus on growing your business, not responding to CRA letters. And, I share my own experience with being audited this year.

Video Transcript: Avoiding a CRA audit for your business: 4 smart tips that actually work

The CRA conducted 96,000 audits in 2023–2024. That’s 53% more than the previous year.

I got one of the love letters myself this year. Being audited by the CRA isn’t anyone’s idea of a good time.
Luckily, there are smart ways to lower your chances of getting that dreaded audit letter.

Tips for business owners to avoid CRA audits

Now, for business owners, what tips can you follow to avoid these audits?

1. Avoid big and unexplained changes.

Frequent shifts in business structure or unusual expenses can set off alarm bells.

My audit was triggered because I’d spent a larger amount than usual on advertising and promotion that particular year. While it was perfectly legitimate and it all turned out fine, I was still red-flagged because it caught their attention.

2. Keep claims reasonable.

Large refunds or long streaks of losses are going to look potentially suspicious. It’s not to say that you can’t have a loss in a particular year or an unusual transaction — but be careful.

3. Be consistent with expense categories.

Work closely with your bookkeepers and accountants to make sure everyone’s classifying expenses in a similar fashion. It’s fine to change once in a while, but be cautious and know what you’re doing. Don’t make it a routine habit.

Make sure everything matches.

Whether we’re talking GST/HST returns, T-slips, or corporate filings — the CRA systems are cross-checking everything. Mismatches invite audits

Get more help to avoid audit red flags on personal tax returns

Want to learn more or get your taxes audit ready? Contact me using the description below.

I’m George Dube, saving the world from tax, one bow tie at a time®.

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I want to help you do wonderful things®.

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Resources

For additional resources related to to the audit red flags on personal tax returns, and avoiding audits generally, see:

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Remember – circumstances are unique! This information is summary in nature. Seek out advice from your tax advisor about your specific situation.