How to Avoid a CRA Audit
Let’s talk about The Canada Revenue Agency, everyone’s best friend. Of course you may be thinking, “Jordan! Why on earth are you doing this to me?! Tax time is over! The last thing I want to do is talk about the CRA.”
Trust me. What I have to share with you is really important.
Have you ever received an email from the CRA letting you know that your tax return is being audited or reviewed? I have, and this is exactly how I felt …
I’ll never forget an experience I had years ago on my birthday. First thing in the morning, I checked my email (not my usual routine). There it was — a message from the CRA.
I logged in and discovered I owed them $500. Happy birthday to me, right?
What happened was simple: I had income reported on a T-slip that never made it to me. I completely forgot about it when filing my return. It was an honest mistake. The CRA reassessed, I paid the balance, and life went on.
That experience got me thinking: what does the CRA actually look for when they review or audit tax returns? And, more importantly for you as an RMT, what can you do to avoid unnecessary red flags?
I don’t (and won’t) work for the CRA, but I do have experience as both an auditor and forensic accountant. I’ve also been reviewed by the CRA myself. So, here are some of the biggest red flags that I believe can put you on their radar.
1. Unusual Changes in Income or Expenses
For self-employed individuals like RMTs, the CRA focuses on two things:
Income being understated (not reporting everything you earn).
Expenses being overstated (writing off more than you should).
Here’s what might get flagged:
Sudden drops in income. For example, if you usually earn around $50,000 and suddenly report half of that, it could raise questions.
Large spikes in expenses. Say you typically spend $500 on advertising, but one year you spend $5,000. The CRA may want receipts and an explanation.
Comparisons to industry averages. The CRA looks at norms for your profession. If most RMTs have an 80% gross profit margin and you’re far below that, they may suspect inflated expenses.
2. Failing to Report Income from T-Slips
This one’s straightforward. Every T-slip filed with the CRA is matched against your tax return. If you miss reporting one (like I did), the CRA will correct your return, add the income, and send you the bill.
It’s not the end of the world if it happens, but it’s an easy avoidable red flag.
3. Withholding Information
If the CRA asks for supporting documents (like receipts for expenses), provide them. Refusing or ignoring their request doesn’t make the issue disappear — it makes things worse.
If you don’t provide proof, they’ll often just assume the expense wasn’t valid and remove it from your return. That can lead to more scrutiny and possibly a full audit.
Bottom line: if they ask for it, give it to them.
4. Unreasonable Home Office Deductions
As an RMT, you may be eligible to claim part of your home as a business expense. Typically, this is based on the percentage of your home used for business.
For most people, 10–15% is reasonable. If you try to claim 50% of your home expenses, that’s likely to raise eyebrows.
The CRA doesn’t publish exact thresholds, but if you can justify your percentage with proper records, you’ll be fine. Just don’t stretch the truth.
5. Unreasonable Vehicle Expense Deductions
The same principle applies here. If you use your personal car for business, you can deduct a portion of related expenses. But the CRA will expect you to back it up with a mileage log.
Trying to write off all your vehicle expenses as “business use” without proof is a quick way to attract attention.
6. Hiding Cash Income
This might be the most tempting — but also the riskiest.
The CRA knows which professions deal in cash regularly (yes, RMTs are on that list). If you don’t report tips or cash payments, it can backfire.
A quick story: I had a friend in university who worked as a waiter. He never reported his tips. The CRA flagged his return and basically said, “You’re a waiter with zero tips? That doesn’t add up.” They adjusted his income and added an estimate of what he should have reported.
The same could happen to you if you try to hide cash or tips. Always include it.
Quick Tips for RMTs to Stay Audit-Proof
✅ Keep receipts and invoices for every expense you plan to claim.
✅ Track mileage with a simple vehicle log (apps make this easy).
✅ Report all income — even cash and tips.
✅ Stay consistent with your income and expenses year to year.
✅ Don’t overdo deductions — claim only what you can reasonably support.
Final Thoughts for RMTs
Here’s the good news: you don’t need to fear the CRA. If you’re honest, organized, and keep proper records, you’ll be in good shape.
Audits usually happen when things don’t add up — sudden changes, unreasonable claims, or missing income. By keeping clean records and reporting accurately, you can avoid most red flags.
As an RMT, your focus should be on your clients, not stressing about tax audits. So stay organized, report everything, and give yourself peace of mind knowing you’re on the right side of the CRA.
For more insights and help, please check out my course: Business & Income Tax Essentials for RMTs.
Disclaimer: This article is meant to share general information and tips for RMTs — it’s not official tax or legal advice. Everyone’s situation is different, and CRA rules can change. If you’re unsure about your own taxes, it’s always best to check with a qualified accountant or tax professional.
