1. Losses year after year
A business that reports losses every year invites the question of whether it is a business at all, or a hobby offsetting other income. Be ready to show a plan, evidence of effort to grow and some progress toward profit.
2. Unusual or aggressive expenses
Personal costs claimed as business expenses, such as meals, travel, vehicles and home office, are the most common trigger, particularly when they are large relative to income. Keep receipts, separate business use from personal use and do not stretch a deduction you cannot support.
3. Filings that do not match the slips
The CRA matches your return against the T4s, T5s, T5018s and other slips it already holds. Unreported income or a mismatch gets flagged automatically. Check every slip against the return before filing, and reconcile differences rather than hoping they go unnoticed.
4. Cash-heavy sales or heavy subcontractor use
Restaurants, trades and construction have historically shown higher non-compliance, so they receive more attention. Report all income, issue T5018s for subcontractor payments and keep cash handling documented.
5. HST returns that do not line up
HST returns that disagree with the income tax return, or that claim refunds every period, draw scrutiny. Make sure sales and expenses agree across every filing and keep the invoices behind every input tax credit.
Documentation is everything
A review goes quickly when the records are organized and each figure can be traced to a document. We help clients keep it that way, and we handle CRA correspondence when a letter arrives. See CRA audit support under advisory, or contact us.