CRA Payroll Audit 2025 — Protect Your Business, Correct Errors, and Prevent Costly Penalties

When the Canada Revenue Agency (CRA) launches a payroll audit, it’s not just about numbers—it’s about compliance, trust, and financial survival. In 2025, CRA’s payroll audit division uses AI-driven matching tools to flag businesses with inconsistencies in T4s, source deductions, or GST/HST filings. A simple mistake in calculating wages, CPP/EI, or contractor classification can trigger a full-scale audit, resulting in penalties, backdated assessments, and even director’s liability.

Payroll audits are among CRA’s most aggressive enforcement actions—and they’re often triggered by small, preventable errors. At Mackisen CPA Auditors Montreal, we help businesses identify risks before CRA does, respond professionally during the audit, and defend every deduction and remittance with precision. Our experts ensure your payroll systems, records, and compliance procedures withstand any level of CRA scrutiny.

We protect your payroll, your people, and your peace of mind.

Legal and Regulatory Framework

Income Tax Act (Canada)

• Section 153(1): Requires employers to withhold income tax, CPP, and EI from employee pay.

• Section 227.1: Holds directors personally liable for unremitted source deductions.

• Section 162(1): Imposes penalties for late or missing remittances.

• Section 163(2): Applies gross negligence penalties for incorrect or missing T4 filings.

Employment Insurance Act & CPP Act
Outline contribution obligations and CRA’s authority to reassess employers for under-remitted contributions.

Tax Administration Act (Quebec)
Gives Revenu Québec similar power to audit QPP, CNESST, and provincial health fund contributions.

Mackisen manages both CRA and Revenu Québec audits concurrently, ensuring consistency and compliance on every payroll-related account.

Key Court Decisions

Buckingham v. The Queen (2011 FCA 142): Directors can be held personally liable for unpaid source deductions.
Jordan v. The Queen (2009): CRA reassessments remain enforceable unless formally challenged.
Guindon v. Canada (2015): Even unintentional errors can attract CRA penalties if due diligence isn’t proven.
McMillan v. The Queen (2021): CRA must consider employer documentation before finalizing payroll reassessments.

These rulings show that documentation and proactive defense are essential to surviving a payroll audit.

Why CRA Targets Payroll Audits

Payroll is one of CRA’s biggest sources of tax revenue—and errors are common. Typical triggers for a 2025 payroll audit include:

• Unremitted or late payroll deductions.

• Inconsistent T4 or T4A reporting.

• Misclassification of employees as contractors.

• Incorrect CPP/EI contributions or exemptions.

• Discrepancies between GST/HST and payroll filings.

• Frequent payroll adjustments or refund requests.

Even small businesses can face penalties reaching tens of thousands of dollars if not properly represented.

Mackisen’s Payroll Audit Defense and Prevention Strategy

1. Pre-Audit Risk Review: Analyze payroll filings and reconcile all CRA-reported balances.

2. Documentation Preparation: Assemble employee records, T4s, T4As, contracts, and payroll registers.

3. CRA Audit Representation: Handle all communication and document submissions directly with auditors.

4. Dispute & Negotiation: Challenge incorrect CRA findings using employment law and tax precedent.

5. Future Compliance Plan: Implement payroll controls to prevent recurrence of errors.

We don’t just fix your payroll problem—we make sure it never happens again.

Real Client Experience

A Montreal engineering firm faced a $147,000 CRA reassessment for misclassified contractors. Mackisen proved the individuals qualified as independent contractors and achieved a 90% penalty reduction.
A Quebec retailer was audited for unremitted CPP contributions. Mackisen reconciled payroll records, proved overpayments, and secured a full reassessment cancellation.

Common Questions

How far back can CRA audit payroll? Generally four years, but up to ten if CRA suspects negligence.
Can CRA audit both federal and provincial payrolls? Yes. CRA and Revenu Québec often conduct joint audits. Mackisen coordinates both seamlessly.
What if I misclassified an employee? CRA can reassess retroactively, but Mackisen can negotiate reduced penalties and corrected treatment.
Can I be personally liable as a director? Yes, under Section 227.1—but Mackisen can build a due diligence defense to protect you.

Why Mackisen

At Mackisen CPA Auditors Montreal, we defend employers against payroll audits with a combination of forensic precision and legal expertise. Our specialists know exactly what CRA and Revenu Québec look for—and how to dismantle weak claims before they become liabilities.

We act fast, speak the language of the auditors, and protect the integrity of your business every step of the way.

Call Mackisen CPA Auditors Montreal today for your 2025 Payroll Audit Protection Consultation. The first meeting is free, and your defense begins immediately.