CRA COVID Subsidy Audits Are Here (What Small Businesses Need to Know)
I’m writing this because a friend of mine - a former small business owner - is just now being fully audited for the COVID subsidies her business received.
Her business closed in February 2023.
She followed the rules.
She applied in good faith.
She did what thousands of small businesses were told to do to survive.
And yet, here we are in 2026, with the paperwork resurfacing like a ghost that refuses to be laid to rest.
If you’re reading this because you’ve received an audit letter, a review notice, or a vague “please provide documentation” request from the CRA related to COVID subsidies - take a breath. You’re not alone. And no, you didn’t do anything wrong simply by receiving support.
What is happening right now is a predictable (and deeply frustrating) phase of the federal government’s cleanup process. Individuals were audited first. Small businesses are next.
Ignoring it will only make matters worse.
Let’s talk about what programs existed, why audits are happening now, and what to do if you get that letter.
Why Are COVID Subsidy Audits Happening Years Later?
Short answer: because the government said they would.
Longer answer: Emergency programs were rolled out fast in 2020. Eligibility rules were complex, guidance changed constantly, and applications were often approved automatically with limited upfront verification.
The understanding from day one was: Money first, Verification later.
The CRA is now doing that “later” part.
Under Canadian tax law, the CRA generally has 3 years to review most tax filings and 6 years (or more) in cases involving misrepresentation (even if it was completely unintentional)
COVID benefits fall into a grey area that allows reviews well after the fact - even if your business has since closed.
That doesn’t mean you’re in trouble. It means they’re ticking boxes.
A Quick Overview of Federal COVID Subsidy Programs for Businesses
If you’re trying to remember what you even received (you’re not alone), here’s a plain-language breakdown of the main federal programs that are now being reviewed.
Canada Emergency Wage Subsidy (CEWS)
What it was: A subsidy to help employers keep staff on payroll during revenue declines.
Who used it: Businesses with employees who experienced qualifying revenue drops.
How much: Up to 75% of eligible wages, depending on the claim period.
Why it’s being audited:
Revenue decline calculations
Eligible vs ineligible employees
Payroll consistency with CRA records
This is the program I was openly critical of at the time - because while many small businesses shuttered, large corporations with robust accounting departments captured substantial CEWS funding and often still laid people off.
Small businesses didn’t have that luxury.
CRA Resource: Canada Emergency Wage Subsidy (CEWS)
Canada Emergency Rent Subsidy (CERS)
What it was: Support for commercial rent and property expenses.
Who used it: Businesses paying rent or property expenses, even without employees.
How much: Up to 65% of eligible expenses, plus lockdown top-ups.
Why it’s being audited:
Lease agreements
Proof of payment
Expense eligibility
CRA Resource: Canada Emergency Rent Subsidy (CERS)
Canada Emergency Business Account (CEBA)
What it was: An interest-free loan with partial forgiveness if repaid on time.
Who used it: Small businesses and sole proprietors with qualifying payroll or expenses.
How much: $40,000–$60,000, with up to $20,000 forgivable.
Why it’s being audited:
Eligibility criteria
Use of funds
Repayment compliance
CRA Resource: Canada Emergency Business Account (CEBA)
Other Programs You Might See Reviewed
Canada Recovery Hiring Program (CRHP)
Canada Recovery Benefit (CRB) for self-employed individuals
Provincial COVID grants tied to federal eligibility
If you applied for any of these, your name is in the system.
IMPORTANT: Do Not Ignore the CRA
I can’t stress this enough.
Ignoring a CRA letter does not make it go away - it escalates it. I’ve written about this in more detail in my earlier post, Missed a CRA Deadline? Here’s What Happens and How to Fix It.
When people come to me already deep in panic mode, it’s usually because:
They didn’t open the mail
They assumed it was a mistake
They were emotionally exhausted and avoided it
I get it. This stuff is overwhelming. Especially if your business didn’t survive the pandemic and you’ve already carried a ton of grief and financial stress. But the worst thing you can do is disappear. Responding - even imperfectly - is always better than silence.
What a COVID Subsidy Audit Usually Looks Like
Most audits start small.
You might receive:
A “review” letter (not technically an audit - yet)
A request for documents
A deadline (usually 30 days)
They may ask for:
Revenue calculations
Bank statements
Payroll records
Lease agreements
Proof of business activity
This does not automatically mean repayment is required.
It means they’re verifying that:
You met the eligibility criteria based on the rules at the time
Your calculations were reasonable
Your documentation supports your claim
Context matters. Intent matters. And the CRA does take pandemic disruption into account - even if it doesn’t always feel that way.
“But My Business Is Closed - Why Are They Still Auditing Me?”
Because closure doesn’t erase history.
If your business filed tax returns, received federal funds or had a CRA business number… it can still be reviewed.
That doesn’t mean you’ll owe money. It just means you still have obligations to respond.
And yes - it’s incredibly frustrating to be dragged back into a chapter you’ve already closed.
You’re allowed to be angry and responsible at the same time.
Common Mistakes I’m Seeing Right Now
Assuming the CRA is accusing you of fraud (Most reviews are compliance checks, not criminal investigations.)
Panicking and responding emotionally (Stick to facts. Keep it boring.)
Sending too much information (Answer the question asked - nothing more.)
Trying to go it alone when you’re overwhelmed (Support matters.)
Letting shame drive decisions (You accepted help during a global crisis. That’s not a moral failing.)
How to Prepare If You Receive an Audit Letter
Here’s your calm, grounded to-do list:
Open the letter and note the deadline
Gather the documents requested
Do not alter records retroactively
Respond in writing, clearly and concisely
Ask for an extension if needed (yes, you can)
Get professional support if it feels like too much
If something was unclear when you applied, that context matters. Many rules were revised retroactively - and that ambiguity is part of the story.
A Note on Fairness (Because We Need to Say It)
I’ll say what I said back then - and what I still believe now:
Large corporations disproportionately benefited from COVID subsidies, while many small businesses were left hanging.
Now, years later, small business owners are being asked to relive one of the most destabilizing periods of their lives through audits that feel cold and disconnected from reality.
Two things can be true:
The government has the right to verify spending
The system was not equitable
If you’re feeling bitter, exhausted, or resentful - that makes sense.
Final Takeaway: Don’t Ignore It, and Don’t Go Through It Alone
If you remember nothing else from this post, remember this:
A CRA letter is not a verdict. It’s a conversation.
One that requires a response - but not panic.
If you or someone you love is facing a COVID subsidy audit:
You are not late
You are not stupid
You are not alone
If you’ve received a CRA review or audit notice related to COVID subsidies and don’t know where to start, this is precisely the kind of situation I help with. Judgment-free. Reach out HERE to connect! You shouldn’t have to carry this alone - especially after everything you already survived.
If this blog resonated with you, check out my blog Audit Survival: HELP! How do I handle a CRA Audit? for more insight on CRA audits.