Handling a Payroll Audit or PIER Report – A Complete Guide by a Montreal CPA Firm Near You

Introduction

A PIER report (Pensionable and Insurable Earnings Review) is one of the most common—and most alarming—letters Canadian employers receive from CRA. A PIER report means CRA has found errors in your CPP or EI calculations, discrepancies in your payroll filings, or mismatches between the amounts reported on T4 slips and the amounts in your payroll remittances. Many employers panic when they receive a PIER report because it often leads to additional payroll audits, penalties, and retroactive adjustments. Understanding how to respond to a PIER report quickly and accurately is essential to protecting your business from costly reassessments and maintaining payroll compliance.

Legal and Regulatory Framework

PIER reviews fall under the Canada Pension Plan Act, the Employment Insurance Act, and the Income Tax Act. CRA performs PIER reviews when:

• CPP contributions are lower than expected
• EI premiums are missing or miscalculated
• pensionable or insurable earnings are misreported
• taxable benefits were not included in pensionable or insurable income
• T4 slips do not match payroll remittances
• previous payroll errors indicate compliance risk

The PIER system compares:

• insurable earnings vs EI contributions
• pensionable earnings vs CPP/QPP contributions
• remitted amounts vs required amounts
• taxable benefits vs insurable/pensionable status
• payroll software calculations vs CRA rules

If discrepancies exist, CRA issues a PIER report, requiring corrections or payments.

Key Court Decisions

Court rulings consistently emphasize employer responsibility for accurate CPP/EI calculations.

1. Hickey v. Canada

The court upheld CRA penalties for under-remitted CPP/EI, reinforcing that employers must calculate contributions correctly, regardless of administrative errors.

2. Soper v. Canada

Corporate directors were held personally liable for unpaid payroll deductions, illustrating the severity of CPP/EI errors.

3. Royal Winnipeg Ballet v. Canada

Misclassification of workers resulted in major CPP/EI reassessments. The employer—not the workers—was responsible.

4. Caron v. Québec

Though provincial, this case reinforces the principle that payroll slips (RL-1/T4) must match deductions and remittances exactly.

These cases show that courts strongly support CRA’s strict payroll enforcement.

Why CRA Targets This Issue

PIER audits are triggered because payroll errors are extremely common. CRA issues PIER reports when:

• payroll software was set up incorrectly
• taxable benefits were not added to CPP/EI earnings
• bonuses and vacation pay were miscalculated
• CPP was not withheld correctly for workers aged 18–69
• EI was not withheld for eligible employees
• CPP/EI exemptions were applied incorrectly
• T4 slips contain inaccurate amounts
• reduced deductions were taken without proper forms
• employers over-contribute or under-contribute

Red flags include:

• discrepancy between CPP/EI remittances and T4s
• repeated payroll errors in past filings
• mismatches between monthly remittances and year-end totals
• inconsistent information on ROEs, T4s, and payroll ledgers

A PIER report is often the first step before a full payroll audit.

Mackisen Strategy

At Mackisen CPA Montreal, we handle PIER reviews and payroll audits through a highly structured, audit-proof process.

1. Full Payroll Reconciliation

We review:
• payroll registers
• year-to-date totals
• CPP/EI calculations
• payroll remittance history
• T4 and RL-1 slip amounts
• taxable benefits
• vacation and bonus payments

We identify the exact source of each discrepancy.

2. Correcting CPP and EI Errors

We:
• recalculate correct CPP/EI for affected periods
• determine shortfalls or overpayments
• prepare amended payroll records
• adjust remittances or request refunds as needed

3. Amending T4 and RL-1 Slips

• filing amended slips electronically
• correcting pensionable and insurable earnings
• updating benefit codes
• ensuring consistency between all tax authorities

4. Responding to the CRA PIER Report

We prepare:
• written responses to CRA
• reconciliation tables
• explanatory notes for discrepancies
• supporting documentation

5. Preventing Future PIER Reports

We implement:
• payroll configuration fixes
• CPP/EI compliance checklists
• quarterly payroll audits
• employee classification reviews
• taxable benefit tracking systems

6. Audit Defence

If CRA escalates the PIER report to a full audit, we:
• act as your representative
• communicate with CRA on your behalf
• provide documentation packages
• negotiate corrections and penalty relief

This system ensures fast, accurate resolution and prevents payroll penalties.

Real Client Experience

A Montreal restaurant received a PIER report showing under-remitted CPP due to incorrect payroll software settings. CRA assessed multiple shortages. We recalculated contributions, filed amended T4s, and fixed the payroll system.

A construction company incorrectly treated certain employees as EI-exempt. CRA required retroactive EI. We corrected ROEs, filed amendments, and prevented penalties through early compliance.

A health clinic failed to report taxable benefits in pensionable earnings. CRA issued a PIER review. We recalculated all benefits, amended returns, and implemented new benefit-tracking procedures.

A retail client overpaid EI for several staff. We requested refunds, amended T4s, and reconciled future payroll.

Common Questions

Employers often ask whether a PIER report automatically means penalties. No—not if corrected promptly.

Others ask whether amended T4s are mandatory. Yes—if T4s contain inaccurate CPP/EI totals.

Some ask whether a PIER report affects future audits. Yes—CRA flags employers with repeated issues.

Another question: Can payroll software prevent PIER errors? Only if configured correctly and reviewed regularly.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses resolve PIER reports and payroll audits quickly, accurately, and with full CRA protection. Whether you run a small business or large workforce, our experts ensure correct CPP/EI reporting and complete payroll compliance.