This is general guidance, not personalised tax advice. Review and audit procedures change — check canada.ca or your accountant if you're actually facing one.

CRA reviews of self-employed contractors are common enough to be almost routine — a desk-based "review" requesting documentation for specific claimed expenses is a normal part of the T2125 filing cycle for many self-employed people, not necessarily a sign anything's wrong. It's the response to that request — or the lack of one — that determines what happens next.

How a review actually starts

Most start with a letter requesting supporting documents for particular expense categories claimed on the return — vehicle expenses and business-use-of-home costs are common targets, since both rely on records (a mileage logbook, a calculation of business-use square footage) that many self-employed people don't keep as rigorously as they should. There's a response deadline, and not responding gets the claimed expenses simply denied by default.

What "no receipts" actually costs you

Without supporting documentation, the CRA can deny the claimed expense outright, reassessing the return with the higher resulting tax owed, plus interest calculated back to the original due date. For vehicle expenses specifically, a logbook covering a representative sample period is generally expected to support any claim — a rough end-of-year estimate is a common reason a vehicle expense claim gets disallowed.

How penalties scale beyond the reassessment

Beyond simply denying an unsupported expense, the CRA can apply a gross negligence penalty where it's judged the taxpayer knowingly, or under circumstances amounting to gross negligence, made a false statement or omission — a significantly higher cost than an honest, correctable gap in the records. Voluntarily correcting a past error through the CRA's disclosure process before being contacted generally results in more favourable treatment than the same issue found during a review.

How far back they can go

The CRA can generally reassess a return within three years of the original notice of assessment for most individuals, but that period extends where misrepresentation attributable to neglect, carelessness or wilful default is involved — and there's no time limit at all in cases of fraud. A genuinely clean, honest gap is a very different exposure from one that looks deliberate.

What actually protects you

  • Digital records that survive — a photo in a camera roll that's since been deleted, or a receipt faded blank in a truck cab, is functionally the same as never having kept it.
  • A genuine mileage log, not a year-end estimate — contemporaneous, trip-by-trip records hold up far better than a number reconstructed from memory months later.
  • Records tied to a specific job or claim — a bank statement shows money left your account, not what it was for or that it was a genuine business expense.

How Site Wallet helps here

Every receipt scanned is dated, itemized, tagged to a job and kept encrypted for as long as you need it — not dependent on a truck cab or a phone's camera roll surviving six years. If a review ever lands, a full export by tax year is a few taps, not a search through paperwork that may not exist any more.

FAQ

How likely is a review, realistically?

Vehicle and home-office expense reviews are common enough for self-employed filers that it's worth assuming one could happen, rather than treating it as a remote possibility.

Can I use bank statements instead of receipts?

They can support a case but don't replace a proper receipt or invoice — a bank statement shows money left your account, not what was bought or that it was genuinely business-related.

What should I do the moment I realise records are missing?

Talk to an accountant about the CRA's voluntary disclosure options before being contacted about the gap — coming forward first is treated more favourably than the same issue found during a review.