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The deadline for filing taxes in Canada for 2026 is April 30. As the big day approaches, Globe Advisor and Globe Investor have teamed up to offer advice on how to maximize returns, find credits and avoid an audit. The full series can be found here.
The Canada Revenue Agency audits a selection of tax returns every year, looking for accidental or deliberate errors that result in underpaid taxes or an overpayment of benefit.
Any real or apparent discrepancies in Canadians’ tax paperwork can raise red flags. But the CRA also has a list of high-risk areas where it concentrates its audit firepower. And those priorities can change from year to year.
Are you prepared for tax season? Submit your questions to our experts
How the CRA goes after actual and suspected tax cheats is also evolving, with the federal government increasingly deploying machine learning and artificial intelligence to mine an ever-growing pool of data about taxpayers’ incomes, transactions and assets, both at home and abroad.
And the CRA is also stepping up its audit activity. In fiscal year 2023-24, it conducted nearly 69,000 of what it calls compliance actions, up from less than 63,000 in 2022-23, the agency previously told The Globe and Mail.
Here are some of the areas where accountants and tax lawyers say the CRA is focusing:
Short-term rentals
The real estate sector has long attracted the CRA’s scrutiny, but short-term rentals, in particular, are likely to be in the agency’s crosshairs this year, said Joseph Devaney, a chartered professional accountant and director at financial education platform Video Tax News.
This will be a make-or-break tax season for the Canada Revenue Agency
A growing number of provinces and municipalities have imposed restrictions on short-term rentals in an effort to boost the availability of housing for long-term residents. The CRA is helping to police compliance with those rules.
The agency now denies expense claims related to short-term rentals that don’t abide by local regulations. It means owners of non-compliant rentals won’t be allowed to deduct expenses such as maintenance and operating costs from the income they derive from the property.
Disallowing expenses can dramatically increase the tax payable on short-term rental income, effectively working as a steep tax increase on taxpayers that don’t play by the rules, Mr. Devaney said.
The rule changes that allow the CRA to deny expenses already applied to the 2024 tax year. But the agency treated the first 12 months of implementation as a transitional period, with relief measures in place for short-term rentals that would get their licensing and permits in order by the end of the year.
The music is bound to change with the 2025 tax year, Mr. Devaney said.
“Now CRA knows what’s going on,” he said. “They can really start enforcing it.”
GST/HST on new homes
Another hot area in the real estate sector: Unreported sales taxes. The sale of a new or substantially renovated home in Canada is subject to GST/HST.
(There’s a federal rebate for homeowners who purchase a newly built property or thoroughly renovate a home as a principal residence, and proposed legislation that would introduce a bigger rebate for first-time buyers is working its way through Parliament.)
Anna Malazhavaya, a Toronto-based tax lawyer and founder of Advotax Law, has seen the number of GST/HST audits related to real estate soar in recent years.
“If the average home in Toronto is approximately $1-million, the HST that would apply on that purchase would be in the area of $130,000,” she said. “There’s a lot of money at stake.”
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For example, the CRA is taking a close look at cases where taxpayers build a new property and then sell it shortly thereafter but declare the house to be their principal residence, Ms. Malazhavaya said.
Cryptocurrencies
With more and more Canadians investing and transacting in cryptocurrencies, digital money is another major focus of the CRA.
Canadians must record whenever they sell, trade or donate cryptocurrency, as well as when they use it for purchases. They must also report any crypto profits or losses.
CRA has been increasing efforts to obtain data on digital currency transactions from third parties, including crypto exchanges, Ms. Malazhavaya said.
The gig-platform economy
If you made money through platforms such as Uber, Airbnb, Etsy or Fiverr, make sure to include that income in your tax return.
The requirement to declare gig-economy earnings has always existed. But CRA has greatly improved its ability to monitor compliance, with digital platforms now mandated to report workers’ incomes directly to the tax agency.
“CRA is going to have all of this information in their hands before you even file your return,” Mr. Devaney said.
