A CRA letter arrived. Here's how to read it

Most letters from the CRA are not audits. Six kinds reach an incorporated owner: a notice of assessment · a review letter asking for receipts behind one claim · a matching letter flagging a slip that isn’t on your return · an instalment reminder · an arrears notice · an audit letter. Work out which one you’re holding before you decide how worried to be. Then answer exactly what it asks, by the date printed on it, and send nothing else.

Interest is already running on two of them — an arrears notice, and any notice of assessment that shows a balance owing. The review and matching letters set response dates, and those dates can generally be extended if you ask before them.

Page one tells you which letter this is

The account, the period, and a reference number with a phone line or a named officer all sit near the top. The account triages the letter. Your business number carries a program suffix — RC for corporate income tax, RT for GST/HST, RP for payroll — so you know which filing is in question before reading a paragraph. A letter about the RT account and one quarter is a GST/HST question about one quarter, not a look at the corporation.

The notice of assessment: three lines matter

A notice of assessment reports what the CRA did with a return you filed.

The balance first: refund, nil, or owing, and the date the owing version is due. Then whether the assessed figures match what you filed — if a section explains changes, the CRA adjusted something, and that adjustment is the whole letter. Then the date on the notice, because it starts the window for a formal objection — a fixed number of days from that date, not from the day the envelope was opened, and different for a corporation and an individual.

If the three lines agree with the return, the notice is a receipt. File it.

A review letter is a receipts request, not an audit

The CRA runs review programs continuously, some before a return is assessed — which is why a refund sometimes sits — and some after. Selection is part filter, part lottery. Being picked says nothing about you.

The letter names the claim, the period, and the date. It wants support for that claim, for that period. Send the invoices or slips it lists plus a one-page schedule tying them to the figure on the return, and stop there. Extra documents are extra surface: an unrequested general ledger answers questions nobody asked, and puts four periods in front of a reviewer who had opened one.

A review that gets no answer generally closes against you: the claim is disallowed and a reassessment issues with the tax and interest attached. Undoing that means a formal objection and months. The envelope was the fast route.

Matching letters compare their slips to your return

Third parties file slips — T4s for employment income, T5s for dividends, the T5008 from a brokerage — and the CRA matches them against your T1. When one doesn’t appear there, a letter follows proposing to add it. The causes are usually dull: a slip issued after you filed, an amended slip, an amount in the wrong box.

Neither answer is silence: the income is already on the return and you point to the line, or it isn’t and you agree. If the CRA is right, the reassessment carries interest from the original balance-due date, not the letter — which is why a matching letter about a three-year-old return can cost more in interest than in tax.

An instalment reminder is not a bill

Personal instalment reminders go out in February and August, calculated from returns already filed — an estimate of a year that hasn’t finished happening. Pay the amount shown and you’re generally protected from instalment interest even if the estimate was wrong; pay less because your income actually dropped and you carry that risk. Nothing is owed because a reminder arrived. The threshold behind it is net tax owing above C$3,000 (C$1,800 for Quebec residents) in the current year and in either of the two before it; the deadlines guide has the corporate schedule too.

Arrears notices are the one clock that genuinely runs

A statement of account or arrears notice means the CRA believes a balance is overdue. Interest runs at a prescribed rate reset quarterly, compounds daily, and started at the original balance-due date rather than at the letter.

What follows is procedural, not personal. A reminder, then a legal warning letter, then a requirement to pay served on your bank or — worse for a working business — on the customer who owes your corporation money. Garnishment and liens sit past that. Income tax debts generally get a restricted period after assessment before legal collection can start; GST/HST and payroll source deductions do not, because that money was collected on the CRA’s behalf and was never the corporation’s. It is the same reasoning that lets a director be assessed personally for unremitted source deductions and GST/HST. Limited liability does not cover money held in trust.

Payment arrangements exist and are ordinary — negotiated before the requirement to pay, not after.

Audit letters name a person and a set of years

An audit letter has a different shape — a named auditor, a phone number, specific taxation years, a list of books and records. For a small corporation with filed returns and reconciled accounts it is rare. When it does arrive, the first exchange sets the scope: what you volunteer in week one defines what gets examined over the next six months. Hand this one to someone before answering.

An illustrative example: a GST/HST review, start to finish

Round numbers. A contractor’s corporation, December 31 year-end, quarterly GST/HST filer.

The second-quarter return reports C$14,000 of GST/HST collected and C$22,000 of input tax credits — the tax the corporation paid on its own purchases, most of it a used excavator bought in May. Net refund claimed: C$8,000. Three weeks pass, the refund doesn’t arrive, and a letter does: send the invoices supporting the credits claimed for April through June, the suppliers’ GST/HST registration numbers, and proof of payment, by the date stated.

Read narrowly, that is one line, on one return, for one quarter. Not the T2. Not the other three quarters. Not payroll.

So: the invoices for that quarter, a one-page schedule tying them to the C$22,000, and registration numbers for invoices that don’t show one. Nothing else goes in the envelope.

Two invoices don’t survive. One, carrying C$900 of credit, has no supplier registration number — the CRA’s documentary requirements step up with the size of the purchase, and above a dollar threshold that number is mandatory rather than helpful. The other, C$600, is made out to the owner personally. That C$1,500 comes out, the refund is released at C$6,500, and the file closes. A partial adjustment is the ordinary result of a review that gets answered.

Ignore the same letter and the arithmetic inverts. The credits go unsupported — all C$22,000, not the C$1,500 that actually failed — so they are disallowed, and a corporation expecting C$8,000 back owes C$14,000 instead, plus interest from the original due date. Recovering the excavator credit then takes an objection.

Quick-method filers get these letters too — the election surrenders credits on operating costs but generally keeps them on capital purchases, exactly the claim that draws a look.

Three rules, whatever the letter says

• Never ignore one. Silence is read as an answer, and it is the wrong one.
• Never send more than was asked. Every extra document is a question you weren’t asked, and often a period nobody had opened.
• Ask for more time before the date, not after it. An extension requested in advance is generally available; a missed date turns a request into a reassessment, and those are slow to unwind.

Before the next letter arrives, authorize a representative on your CRA accounts. Filed through the CRA’s representative system, it lets your accountant see the account, read the correspondence and speak to the agent — so a review letter is understood the day it lands, not the weekend you get to it.

What Cadence does

We hold the authorization, so ordinary CRA correspondence reaches us first. Notices of assessment get checked against what we filed; review and matching letters get answered with exactly what was asked and nothing more; account corrections, payment and instalment questions get handled without a call to you. That is core CRA support, included from the Year-Round Tax Partner package up rather than billed by the letter. Active major audits, formal objections, voluntary disclosures and collections files are different work — we take those selectively or refer them out, and we say which at the start. A first response lands inside one business day under our response standards, with a timeline when the answer needs real work.