What triggers a CRA audit of an Ontario CCPC?

CRA uses risk-based selection driven by data-matching and industry benchmarking. The most common audit triggers for an Ontario CCPC are: unresolved shareholder-loan balances, repeated business losses on T2125 or Schedule 125, refund-position HST filings, mismatch between reported income and third-party slips (T4, T4A, T5, T5018), and industry-benchmark outliers on gross margin or expense ratios.

Data matching. CRA runs automated cross-checks between your T2/T1, GST34, T4/T4A/T5 slips issued to and by you, and Statistics Canada industry norms. A construction Opco reporting a 5% gross margin when the NAICS benchmark is 22% is a matched outlier and is flagged for a limited-scope review at minimum.

Shareholder loans. ITA s. 15(2) deems an outstanding shareholder loan to be income unless repaid within one year after the corporation’s fiscal year-end. Balances that persist for 24+ months, or increase in the second year, land in the audit inventory.

Refund position on HST. A GST34 that produces a refund (rather than remitting) is pre-verified. If a business swings from remitter to refunder in one quarter without an obvious cause (like a capital acquisition), a desk audit follows.

ITC on expenses that look personal (vehicle over the s. 67.3 lease ceiling, meals near the s. 67.1 50% cap, home-office in excess of the s. 18(12) restriction) is a leading paper-audit theme.

Note: CRA also runs project audits on chosen industries each year. Recent focus areas include real estate flipping (ITA s. 12(1)(z.7) property flipping rule), platform economy income (Uber, DoorDash), and tradesperson underground economy files.

Source: canada.ca — Business audits

— Bader A. Chowdry, CPA, CA, LPA — Insight Accounting CPA

Disclaimer: Bader A. Chowdry, CPA, CA, LPA is a Licensed Public Accountant regulated by CPA Ontario. Insight Accounting CPA Professional Corporation is a Chartered Professional Accountant firm. This content is general information only and does not constitute professional advice for your specific facts. Confirm current rules and figures with your own advisor before acting.