A CRA audit needs a clear explanation of the facts
Prescott taxpayers may receive a CRA audit request about a small business, trade or contract work, rental property, GST/HST, payroll, personal banking, or a tax claim. The underlying documents are often spread between bank accounts, invoices, statements, receipts, property files, contracts, and an old accounting system. CRA may see a deposit or a number on a return without seeing the practical facts that explain it.
The audit notice normally identifies the years being reviewed, the account, records requested, CRA contact, and deadline. It may concern income, expenses, GST/HST, payroll, property use, rental activity, or deposits. A useful response is built around what CRA is testing. It should explain how the figures were calculated and which records support the explanation.
Tax Help Canada helps Prescott residents, contractors, business owners, landlords, property owners, and families manage CRA audit files. We review the scope, organize evidence, prepare reconciliations and explanations, communicate with CRA, and help assess a proposal or reassessment before deadlines create more pressure.
Identify the CRA issue before replying
CRA may ask for bank statements, invoices, receipts, contracts, GST/HST returns, payroll reports, property documents, or a written explanation. A review of deposits may test reported income. A property request may concern rental use, repairs, personal use, or a capital improvement. A request about payments to workers can concern payroll deductions or contractor classification.
For a contractor, records can include contracts, invoices, client payments, vehicles, equipment, expenses, and GST/HST. Business records can include sales, customer payments, payroll, expenses, banking, and tax collected. Rental files can include leases, deposits, financing, taxes, insurance, repairs, and personal-use periods. This first review identifies missing items early enough to request them from banks, suppliers, clients, property managers, former bookkeepers, or online services.
Reconcile income, deposits, and tax collected
CRA may compare the income reported on a return with invoices, deposits, payment reports, GST/HST, and third-party information. A deposit is not automatically income. It may be sales revenue, rent, tax collected, a transfer, loan proceeds, a reimbursement, a refund, or money received for another person. Significant amounts should have a documented source.
We prepare schedules that connect sales to invoices or payment reports, rent to leases and deposits, and transfers to matching account activity. Loans, reimbursements, refunds, merchant fees, and other non-income amounts need evidence. This helps explain why gross sales, bank deposits, and GST/HST may not match line by line and reduces the risk of a non-income deposit being treated as undeclared income.
Expenses need the same discipline. Vehicles, equipment, home office, supplies, travel, repairs, property costs, and contractor payments must be supported and connected to an income-earning purpose. Where personal use exists, the allocation should be reasonable and documented.
Review the connected accounts as a whole
An audit can start with a personal return yet affect business banking, GST/HST, payroll, corporate records, rental activity, and other reporting. A sole proprietor’s sales should fit deposits and GST/HST filings. An incorporated owner may have payroll, shareholder transactions, expenses, and personal income. A rental property can connect to banking and property records.
We consider those links before detailed submissions are made. A deposit explanation should agree with books and GST/HST. Worker payments should fit payroll and expense records. Property costs should make sense given actual use. This reduces inconsistent answers and helps identify possible tax, interest, penalties, payment, and collections exposure.
Reconstruct incomplete files from credible evidence
Older records can be incomplete after a bank change, lost receipt, unavailable supplier, former bookkeeper, or account closure. Banks, cards, suppliers, clients, contracts, email, property records, accounting backups, prior returns, and CRA information can support a factual reconstruction. The aim is the best accurate evidence available, not an unsupported estimate.
The method should be clear. Sales can be matched to invoices and deposits; expenses to statements and vendor records; rent to leases and banking history. This gives CRA a practical way to review the response.
Keep the audit response controlled
CRA may follow up by phone, email, letter, meeting, or secure upload. Details should be checked against the records before an answer is given. We help prepare written submissions identifying the audit question, facts, calculation, and support, while keeping a clear log of CRA requests and responses.
An audit deadline needs attention, but it should not force an improvised reply. If historic statements, duplicate invoices, payroll records, or property documents are still being collected, that work should be raised early. In appropriate circumstances, CRA can be asked for more time before the deadline, with a clear account of what is being obtained.
Review a proposal before reassessment
CRA may accept the reporting, request final information, send a proposal, or issue a reassessment. A proposal can expose an overlooked document or incorrect assumption that can still be addressed. If CRA reassesses, objection deadlines, interest, penalties, payment arrangements, and collections concerns may apply.
Get a clear audit plan
If CRA has contacted you about a Prescott audit, a confidential review can make the next step manageable. We will review the years and accounts, CRA’s questions, available records, and the business, property, rental, or personal facts requiring explanation. From there, you can respond with an organized plan grounded in evidence.