What to Expect When Your Small Business Is Reviewed by the CRA
If you own a small business in Chilliwack, Abbotsford, or elsewhere in the Fraser Valley, the thought of a CRA review can be stressful. Many business owners imagine an auditor showing up unannounced, demanding mountains of paperwork, and scrutinizing every transaction. The truth is, most CRA reviews are routine, and understanding what to expect can make the process straightforward and stress-free.
Being prepared is key. A review doesn’t automatically mean you’ve done something wrong; it’s a chance for the CRA to ensure your filings are accurate, your deductions are valid, and your business remains compliant. By knowing what to expect, you can approach a CRA review with confidence rather than fear.
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What Triggers a CRA Review?
The CRA conducts reviews for several reasons:
- Random selection for routine checks
- Unusual deductions or large expense claims
- Inconsistencies in tax filings
- Complaints or tips from third parties
It’s important to remember that a review doesn’t mean wrongdoing. Many businesses are selected simply to ensure compliance. The CRA’s goal is to protect the integrity of the tax system, not to penalize honest business owners.
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Types of CRA Reviews
There are different types of reviews small businesses might encounter:
Desk Reviews:
- Conducted remotely
- The CRA may request supporting documents via email or mail
- Focuses on verifying reported income, deductions, and credits
Field Audits:
- CRA may visit your business in person
- More detailed, reviewing books, records, and internal controls
- Typically for businesses with higher risk factors or complex filings
Why This Matters:
Understanding the type of review helps you know what to expect, how much preparation is needed, and how to allocate resources efficiently. Desk reviews often require minimal disruption, while field audits may involve more time and documentation.
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Documents and Records You’ll Need
Preparation is key to a smooth CRA review. Make sure your records are organized and accessible:
- Financial Statements: Income statement, balance sheet, cash flow statements
- Receipts and Invoices: Supporting documentation for all expenses and deductions
- Bank Statements: Accurate reconciliation with accounting records
- Payroll Records: Employee classifications, T4 slips, source deductions
- Contracts and Agreements: With clients, suppliers, or contractors
Having these documents readily available demonstrates professionalism and reduces the risk of errors or penalties.
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Common Areas the CRA Focuses On
While every review is different, some areas are commonly scrutinized:
- Revenue Reporting: Ensuring all income is reported accurately
- Expense Deductions: Verifying that claimed business expenses are legitimate
- GST/HST Filings: Confirming proper collection, reporting, and remittance
- Payroll and Source Deductions: Checking compliance with T4 slips, CPP, EI, and Worksafe BC remittances
- Asset Depreciation: Ensuring capital assets are depreciated correctly
Why This Matters:
Knowing the focus areas lets you double-check your records before a review. This proactive approach can prevent mistakes, reduce stress, and avoid unnecessary penalties.
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How to Handle a CRA Review
Here are the steps to manage a CRA review effectively:
- Stay Calm: A review is routine. Panic or guessing answers can create issues.
- Be Organized: Provide clear, accurate documentation. Avoid guessing or withholding information.
- Ask Questions: Clarify what the CRA is requesting if you’re unsure.
- Communicate Professionally: Respond promptly to requests and maintain a polite tone.
- Seek Professional Help: A qualified bookkeeper or accountant can guide you, review documents, and ensure compliance.
Being prepared and working methodically will make the review process smoother and less stressful.
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Common Misconceptions
Many small business owners assume a CRA review means audit trouble. In reality:
- Reviews are often routine and random.
- They can be resolved quickly with accurate records.
- Being proactive with bookkeeping minimizes the risk of complications.
Why This Matters:
Dispelling myths helps business owners stay calm, approach the review with confidence, and avoid unnecessary stress.
Final Thoughts
A CRA review can feel intimidating, but preparation is everything. Maintaining accurate bookkeeping, organizing your records, and understanding what the CRA looks for ensures that a review is manageable.
If you’re a small business owner in Chilliwack or the Fraser Valley, proactive bookkeeping and professional guidance are your best tools for a stress-free CRA review. You don’t have to navigate this alone; getting support early can prevent headaches later.
Take Action Today
Review your records, reconcile your accounts, and reach out to a professional if you have questions. Preparing now makes a CRA review much less intimidating.
Worried about a CRA review? Contact SBSC Ventures today to get your bookkeeping in order and ensure you’re fully prepared. Don’t wait until the CRA knocks. Proactive preparation protects your business and peace of mind.