CRA’s fiscal year ends March 31. The Auditor General found that 40% of all audit files close in February and March alone. If you own a corporation, rental properties, investments, or claim home office or vehicle expenses — here’s why the next five weeks demand your attention.
Every year, something predictable happens inside the Canada Revenue Agency. As the fiscal year-end approaches on March 31, audit activity accelerates. Files that have been open for months suddenly need to close. Proposals get finalized. Reassessments go out.
This isn’t speculation. The Office of the Auditor General of Canada documented this pattern in their 2018 Fall Report on CRA’s compliance activities, finding that approximately 40% of audit files were closed in the final two months of the fiscal year — February and March.
For anyone who might be on CRA’s radar — whether you run a business through a corporation, own rental properties, hold investments with unrealized gains, claim home office deductions, use a vehicle for work, or engage contractors — this pattern has real consequences for how your file gets handled.
CRA's Track Record on Accuracy
Before understanding why the year-end matters, it helps to understand how often CRA gets it right in the first place.
The Auditor General’s 2016 Fall Report examined what happens when taxpayers formally object to CRA audit assessments. The finding: 65% of objections were resolved fully or partially in the taxpayer’s favour. Some were complete reversals. Some were partial reductions. But the majority of taxpayers who pushed back received a better outcome than what CRA initially assessed.
More recently, CRA’s own 2024-25 Departmental Results Report showed that 128,386 objections were filed that year — a 47% increase from the prior fiscal year. That volume of objections represents a significant and growing gap between what CRA assesses and what taxpayers believe they actually owe.
The practical takeaway is straightforward: a CRA reassessment is a starting position, not a final answer. The data consistently shows that taxpayers who formally object are more likely to see their assessment reduced than to have it upheld in full.
TEBA: The Metric Behind the Aggression
So why does CRA consistently over-assess? The answer lies in an internal performance metric called TEBA — Tax Earned by Audit.
TEBA tracks the total tax assessed from audit activity. It measures output in dollars — how much additional tax was identified. What it does not measure is how much of that tax ultimately gets collected, or how much gets upheld when taxpayers object.
The C.D. Howe Institute examined CRA’s audit incentive structure in a 2016 study and concluded that some auditors may be “auditing in ways that satisfy the evaluation system rather than with a view to the fairest amount of tax due.”
The critical detail, documented by the Auditor General in their 2018 Fall Report: TEBA does not get adjusted when reassessments are subsequently overturned on objection. If an auditor assesses $500,000 in additional tax and that amount later gets reduced to $50,000 through the objection process, the auditor’s TEBA still reflects the original $500,000. There is no feedback mechanism. No correction. No consequence within the metric for an inaccurate assessment.
Even senior CRA officials have acknowledged this dynamic. At the 2018 Canadian Tax Foundation Annual Conference, a senior CRA official recognized that TEBA-driven incentives have, in some cases, produced reassessments that are unlikely to be sustained on appeal.
This doesn’t mean individual auditors are acting in bad faith. They’re operating within a system that measures the wrong thing. But understanding this system is essential for anyone dealing with a CRA audit — because it explains why initial assessments tend to be aggressive, and why the objection process exists as a necessary correction mechanism.
Why February and March Are Different
When you combine annual TEBA targets with a March 31 fiscal year-end, the result is predictable: structural pressure to close files in the final weeks of the year.
The Parliamentary Budget Office estimated in October 2020 that CRA generates approximately $5.7 in fiscal impact for every dollar spent on compliance activities. That return expectation creates institutional incentive to maximize audit output — and the year-end deadline concentrates that pressure into a narrow window.
CRA’s workforce has grown substantially. Investment Executive reported in June 2025 that CRA’s headcount increased roughly 47% between 2014 and 2024, reaching approximately 59,000 employees. A larger audit workforce operating under the same annual deadline means more files competing for closure in the same February-March window.
What this looks like in practice: an auditor working your file in October might give you 30 days to locate supporting documentation. That same auditor in March, with their fiscal year closing, might give you 15. They may be less willing to grant extensions on information requests, less inclined to accept grey-area deductions in your favour, and less open to follow-up discussions about your position.
When deadlines are tight, decisions become binary. And on grey-area tax issues — which represent much of what gets audited — binary decisions tend to go against the taxpayer.
What You Can Do: The Three-Phase Playbook
Whether you’re currently in an audit or want to make sure you’re never caught unprepared, the protection framework breaks down into three phases.
Before an Audit
Maintain organized financial records for a minimum of six years. Keep clear separation between personal and business expenses with specific documentation — dates, distances, and business purpose for vehicle claims; dedicated workspace measurements for home office deductions; written agreements for contractor relationships.
Have a tax professional conduct a pre-audit risk review. This is essentially a stress test: someone examining your filings the way CRA would, identifying vulnerabilities before CRA finds them.
During an Audit
Engage a tax professional at the start of the audit, not after the reassessment. A professional who understands the system — including the year-end pressure dynamics — can manage the information flow and prevent overreach.
Get all CRA requests in writing. Confirm the statutory basis for every information demand. Respond within stated deadlines but provide only what is specifically requested. Document every interaction: the agent’s name, the date, what was discussed, and what was provided.
During the February-March period specifically, be aware that response deadlines may be tighter than usual. If you need more time, request extensions in writing through your tax professional — it carries more weight than a verbal request.
After a Reassessment
Mark the 90-day objection deadline the day you receive a Notice of Reassessment. This is non-negotiable. If the deadline passes, you can apply for a one-year extension, but approval is not guaranteed.
File a Notice of Objection. The data supports this decision — 65% of objections in the Auditor General’s study were resolved in the taxpayer’s favour. The objection process is a designed part of the system, created specifically because the initial assessment process chronically produces numbers that need correction.
Be aware that filing an objection does not always pause CRA’s collection activity. Depending on your circumstances, CRA may continue to pursue payment while the objection is under review. Discuss the specifics with your tax advisor.
If an objection is unsuccessful and you believe the reassessment remains incorrect, you have the right to appeal to Tax Court — and that is the stage where a tax lawyer becomes essential.
The System Is Getting More Powerful
CRA’s capacity is expanding. Their 2025-2027 AI Strategy focuses on deploying artificial intelligence for risk assessment and audit selection. The Crypto-Asset Reporting Framework will require exchanges and brokers to report directly to CRA starting with the 2026 calendar year, with international information exchange beginning in 2027.
Budget 2024 proposed significant new enforcement powers — including the authority to compel sworn testimony during audits, Notices of Non-Compliance carrying $50-per-day penalties up to $25,000, and a 10% penalty for non-compliance with court-issued compliance orders on amounts exceeding $50,000. These proposals are not yet enacted and draft rules were updated in 2025, but the direction is clear.
More data flowing in. More automated risk scoring. More enforcement tools. The same TEBA incentive structure underneath.
Who Should Be Concerned — And Who Shouldn't
If your records are organized, your personal and business expenses are clearly separated, and you have documentation supporting everything you’ve claimed — you’re in a strong position. The system is aggressive, but it has a much harder time with people who are prepared.
If you’ve been meaning to clean up your record-keeping, or if you have claims you can’t fully support — the next five weeks are the time to address that. Not because CRA is targeting you specifically, but because this is the period when the system is under the most pressure to close files and make decisions quickly.
Either way, understanding how the system actually works — the incentives, the pressure points, the correction mechanisms — puts you ahead of the vast majority of Canadian taxpayers.
CRA says there are no quotas. And maybe there aren’t, on paper. But the system doesn’t need a quota to be aggressive. It just needs an incentive.
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Sankalp (Sunny) Jaggi, CPA, CA, MTax, CFF — Tax Principal, Cedar Consulting Group theadvisorstable.com | cedargroup.ca
Sources: Office of the Auditor General, 2016 Fall Report (Report 2) and 2018 Fall Report (Report 7) | C.D. Howe Institute, “Auditing the Auditors,” April 2016 | Parliamentary Budget Office, October 2020 | CRA 2024-25 Departmental Results Report | CRA 2025-26 Departmental Plan | Investment Executive, June 2025 | Budget 2024 proposals summarized by Fasken (Sept 2024) and BLG (May 2024)
