CRA Payroll Audit 2025 — Protect Your Employees, Defend Your Business, and Eliminate CRA Penalties

In 2025, CRA’s Payroll Compliance Audit Program has expanded into one of the most aggressive enforcement areas for Canadian employers. Using advanced cross-matching between T4 slips, CPP/EI remittances, and business bank deposits, CRA’s automated audit system now detects even minor payroll inconsistencies. Companies across Canada are being reassessed for “unreported benefits,” “employee misclassification,” or “insufficient source deductions” — often due to administrative errors, payroll software issues, or outdated advice. These audits can lead to thousands in penalties and personal liability for directors. At Mackisen CPA Auditors Montreal, we defend employers and directors against CRA’s payroll audits with precision, documentation, and law. Our CPA auditors and tax lawyers correct discrepancies, prove compliance, and eliminate unnecessary penalties. We don’t let CRA punish honest businesses — we make sure every number tells your story accurately.

Legal and Regulatory Framework

Income Tax Act (Canada)

• Section 153(1): Requires employers to withhold and remit income tax, CPP, and EI deductions.

• Section 227.1(1): Holds directors personally liable for unremitted source deductions if due diligence is not proven.

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

• Section 220(3.1): Authorizes CRA to cancel or reduce penalties and interest through the Taxpayer Relief Program.
  Employment Insurance Act & Canada Pension Plan (CPP) Act
  CRA enforces these statutes during payroll audits to verify accurate employee and employer contribution calculations.
  Tax Administration Act (Quebec)
  Revenu Québec conducts similar audits under QPP, QPIP, and HSF obligations. Mackisen manages both CRA and Revenu Québec simultaneously to ensure unified compliance.

Key Court Decisions

Buckingham v. The Queen (2011 FCA 142): Directors can avoid liability by proving reasonable oversight and preventive measures.
Thibault v. The Queen (2022): CRA must demonstrate negligence, not mere error, before imposing payroll penalties.
Bédard v. The Queen (2022): Proper documentation and timely remittance protect employers from reassessment.
Guindon v. Canada (2015): Honest administrative or accounting mistakes cannot justify gross negligence penalties.
These rulings confirm that CRA payroll audits can be successfully defended through evidence of diligence and professional representation.

Why CRA Targets Payroll

CRA prioritizes payroll audits to increase compliance revenue and detect errors across employee records. Common 2025 triggers include:

• Late or missing source deductions.

• Employee vs. contractor misclassification.

• Unreported taxable benefits such as vehicles, housing, or allowances.

• Inconsistencies between T4, T4A, and payroll system data.

• Missed QPP, QPIP, or HSF remittances in Quebec.
  CRA assumes non-compliance — Mackisen proves diligence.

Mackisen’s Payroll Audit Defense Strategy

1. Audit Risk Review: Examine CRA’s reassessment notice, employee listings, and payroll remittance reports.

2. Record Reconciliation: Verify deductions, benefits, and T4/T4A filings to identify and correct inconsistencies.

3. Classification Defense: Prove independent contractor or employee status using CRA and court criteria.

4. Formal Objection Filing: Submit a Notice of Objection to suspend enforcement and challenge audit findings.

5. Penalty & Interest Relief: Apply under Section 220(3.1) to eliminate financial penalties once due diligence is established.
   Our defense combines precision accounting with strategic legal advocacy to restore confidence and compliance.

Real Client Experience

A Montreal tech company was reassessed $224,000 after CRA misclassified contractors as employees. Mackisen provided contracts and secured a full reversal.
A Quebec logistics firm faced $168,000 in payroll penalties for late remittances. Mackisen proved system delays and CRA cancelled all charges.

Common Questions

Can CRA audit payroll from multiple years? Yes — typically three years, or ten if CRA alleges negligence. Mackisen enforces legal time limits.
Can CRA hold directors personally liable? Yes — but Mackisen prepares due diligence evidence to prevent personal exposure.
Can CRA audit payroll and GST at the same time? Yes, and Mackisen coordinates both to ensure consistent reporting.
Can CRA deny benefits or deductions? Only without proof — Mackisen rebuilds documentation to validate every claim.

Why Mackisen

At Mackisen CPA Auditors Montreal, we protect Canadian employers from payroll audit nightmares. Our integrated team of CPAs, tax lawyers, and payroll compliance experts ensures full defense from the first CRA contact to the final resolution. We act fast, document thoroughly, and negotiate effectively — because your team deserves protection as strong as your work ethic. When CRA audits your payroll, Mackisen audits their process.
Call Mackisen CPA Auditors Montreal today for your 2025 Payroll Audit Defense Consultation. The first meeting is free, and your protection starts immediately.