Avoid CRA Audits in 2025: Top 5 Compliance Tips for Small Businesses
The Canada Revenue Agency is clamping down in 2025. Between AI-powered audit detection, steeper penalties (up to $25,000), and industries like construction, sole proprietorships, contractors, and home-based businesses under the microscope, the message is clear: cleanliness and documentation aren’t optional anymore.
After we shared this update in our client newsletter, many of you asked, “What can I do as the business owner to make sure my books are always CRA-ready?” To help, we’ve gathered the top questions we heard and our recommendations, so you know exactly what steps to take on your side.
Top Questions & What You Can Do
Here are the top five questions clients asked, plus what concrete actions you should take to avoid CRA red flags.
1. Meals & Travel Expenses: What Can I Legitimately Claim?
Many clients asked: “How far can I push meals and travel without getting flagged?”
What you can do:
Keep all receipts with full details: who you met, why, where, date, amount. No blank receipts.
Ensure meals/travel are reasonable and directly business-related. If the business purpose is fuzzy, the claim will be questioned.
Upload and forward expenses regularly. The CRA expects prompt, accurate documentation (ideally digital).
2. Vehicle Expenses: How to Track & Document
Concern: “If I claim high vehicle usage, how do I prove it’s for business, not just commuting or personal use?”
What you can do:
Maintain a mileage log with dates, destinations, and business purpose.
Separate business vs personal kilometers clearly; only the business portion is valid.
Use consistent methods (for example, log daily or every trip) so if audited, you can show your records are reliable.
3. Use of Home Office: Determining What’s Acceptable
Many clients want to know: “Is my home office deduction too large, or too generous, and how can I get it right?”
What you can do:
Measure the part of your home used exclusively for business (square footage or proportion).
Keep records for home expenses you will claim: utilities bills, insurance, property taxes, mortgage interest (if applicable), etc.
Only claim what you reasonably use. If your workspace is tiny or shared, large claims will draw attention.
4. Importance of Documents: Records & Consistency
Question: “What kinds of documents are essential, and how well organized do they have to be?”
What you can do:
Retain all supporting documentation: invoices, bank statements, contracts, credit card slips, etc.
Keep everything in a digital, searchable format if possible. Electronic records speed up audits and reduce friction.
Make sure your filings (GST, payroll, income) align with what your documents show. Inconsistencies between returns and underlying documents are a common red flag.
5. Staying Compliant with GST/HST Registration and Reporting
Some clients were unsure: “At what point do I have to collect GST/HST, and what happens if I fail to do so properly?”
What you can do:
Monitor your revenues. When you exceed $30,000 in gross revenues over four consecutive calendar quarters, you are required to register for GST/HST.
Once registered, collect GST properly and file on time. Even occasional mistakes or late filings can trigger CRA attention.
Keep your records tidy: know what you collected; keep track of input tax credits; ensure amounts reported on GST returns match your invoices and bank deposits.
Your Role & Our Support
You don’t have to navigate this alone. As your bookkeeping partner, we ensure your books are audit-ready so that if the CRA comes knocking, you’re prepared to respond, not scrambling.
Here’s what you, as a client, should commit to:
Send receipts, logs, and documents on time and in detail.
Maintain separation between business & personal finances.
Be proactive: review your monthly statements, check for irregularities, and raise questions early.
If at any point things are unclear, reach out to us. We can review any questionable claim, help you tighten up your record-keeping, and ensure compliance so CRA audits are manageable, not painful.