DOJ & CRA Post-Audit Inquiries: A Guide for Non-Parties

Key Takeaways for Non-Parties

• Declining involvement is the default, standard, and strategic approach.

• DoJ and CRA inquiries post-audit do not create a legal obligation to respond.

• Written communication ensures control and minimizes risk.

*Tax dispute rules vary by stage, and this guidance applies specifically to CRA and DOJ inquiries involving other taxpayers after an audit has concluded. It does not constitute legal advice. Non-parties should consult a tax lawyer to assess their specific circumstances and determine the appropriate course of action.

The DOJ’s Growing Use of Informal Inquiries

DoJ and CRA outreach to non-parties following audits is increasing. In several high-profile tax disputes, DoJ lawyers have sought information outside formal Tax Court procedures - through calls, emails, or casual conversations - rather than obtaining court approval for a third-party examination under Rule 99.

While positioned as routine inquiries, engaging without legal guidance can introduce risk, including inadvertently providing statements that DoJ later uses to support its case. Courts have previously scrutinized these tactics, recognizing them as procedural overreach in some cases.

Strategic Considerations for Non-Parties

Non-parties facing DOJ or CRA outreach should consider the following:

1. Declining Involvement: A Standard and Strategic Approach

• Non-parties are not obligated to provide information unless compelled by the Tax Court.
• Courts have recognized a non-response as a valid legal position.
• Engaging voluntarily can lead to further scrutiny and expanded inquiries.

Action: Many non-parties opt to decline engagement entirely. A professional response sets clear boundaries while maintaining professionalism.

Template language for declining:

"Thank you for reaching out. I’ve decided not to participate in this discussion. I appreciate your understanding and ask that you respect this decision."

or

"Thank you for reaching out. I won’t be participating in this discussion. Please direct any further inquiries to my lawyer, [Lawyer’s Name], copied here."

2. No Legal Obligation Without a Court Order

• The Tax Court of Canada Rules require the DoJ to seek leave from the court before examining non-parties.
• Rule 147 grants the Tax Court discretion to limit or deny these requests to protect third parties.
• Courts have previously denied DoJ efforts to compel third-party information without meeting these thresholds.

Action: Determine whether formal legal authority exists before engaging.

3. Informal Engagement Increases Exposure

• Statements made in informal settings are not privileged and may strengthen the DOJ’s position.
•  DoJ representatives have threatened heightened CRA audits due to non-cooperation to improperly manipulate and pressure third parties to change prior statements and support the CRA's case.
• Discussions outside formal legal proceedings may broaden scrutiny or lead to follow-up requests.

Action: Avoid off-the-record discussions or casual engagement.

4. Written Communication Reduces Risk

• Written exchanges prevent misinterpretation and allow for legal review before responding.
• Maintaining a formal record limits ambiguity in future proceedings.

Action: If responding, insist on written questions. Use professional language such as:

"I prefer to respond in writing to ensure accuracy. Please send your questions by email."

Bottom Line

DoJ and CRA post-audit inquiries are increasingly common, but engagement remains discretionary unless compelled by the Tax Court. Courts recognize declining involvement as a legitimate and strategic approach. For high-stakes matters, consulting a tax dispute lawyer before responding ensures clarity and protection.