CRA Desk Audits are Increasing for US Companies

What Is a CRA Desk Audit?

A desk audit is a targeted review by CRA’s verification division. It is typically initiated when a GST/HST return, often involving a sizable refund, triggers a closer look. Unlike full-scale audits, which examine multiple tax periods, a desk audit focuses on verifying a specific filing and may request supporting documentation such as sales and purchase records, proof of tax registration, and a description of the company’s business activity.

Despite its seemingly limited scope, a desk audit must be taken seriously. Incomplete or insufficient responses can result in denied refunds, reassessments, or escalated reviews. The CRA has become increasingly assertive in this area, issuing large assessments with minimal warning and providing registrants with just 30 days to respond before the amounts become collectible.

Why Non-Resident Businesses Are at Risk

Non-resident companies registered for GST/HST are particularly vulnerable to these audits for several reasons. Many file returns from outside of Canada and may not be fully aware of CRA’s documentation expectations. Internal teams—often US-based or globally dispersed—may underestimate the seriousness of the audit or provide incomplete information. When this occurs, the CRA may disallow refunds or assess liabilities based on their own assumptions, shifting the burden of correction to the taxpayer.

Common risk factors include:

• Filing from outside Canada with limited familiarity with CRA standards
• Submitting incomplete or delayed documentation during the audit process
• Misunderstanding the seriousness of a desk audit’s potential escalation
• Being in a regular refund position, which naturally draws the CRA’s attention

In several recent cases, clients filed legitimate refund claims only to have those claims delayed or denied due to insufficient documentation during a desk audit. In one instance, a desk audit escalated into a broader review that resulted in a multi-million-dollar assessment. Once an assessment is finalized, companies may choose to appeal—but in most cases, the assessed amount must still be paid while the appeal is pending. Appeals can take 12 to 24 months to resolve, tying up significant funds and eliminating the opportunity to resolve the issue at the audit level.

How DMA Supports Audit Defense

DMA provides audit defense and advisory services to support all stages of the CRA audit process—from desk audits to appeals. We work proactively to prepare documentation, manage communication with CRA auditors, and defend valid refund claims or contest inappropriate assessments. Our familiarity with the CRA’s expectations allows us to guide clients in building a complete, accurate response from the start—minimizing delays and protecting cash flow.

In several recent engagements, our early involvement at the desk audit stage has helped avoid costly reassessments, expedited refund claims, and improved overall audit outcomes.

Don’t Wait Until It Escalates

If your organization is registered for GST/HST in Canada and filing returns—particularly if you are regularly in a refund position—it is essential to prepare for the possibility of a desk audit. These audits are no longer uncommon, and their impact can be significant if not addressed promptly and strategically.

DMA is here to help. Our team understands the nuances of Canadian indirect tax enforcement and is prepared to assist you in defending your position, recovering delayed refunds, and maintaining compliance.