CRA Payroll Source Deduction Audit 2025 — Defend Your Business, Eliminate Personal Liability, and Stop CRA Penalties

In 2025, CRA’s Payroll Source Deduction Audit Program has become one of the most aggressive enforcement areas in Canada. CRA’s automated audit tools now compare T4s, T4As, and PD7A remittances across all employer accounts to detect missing source deductions or delayed remittances. Many businesses are being penalized even when errors stem from software issues, cash flow timing, or accountant mistakes. The result — frozen accounts, heavy interest, and directors held personally liable. At Mackisen CPA Auditors Montreal, we defend employers and directors from payroll audits, recover overassessed amounts, and secure penalty relief. We don’t let CRA treat administrative errors like fraud — we restore compliance and financial protection for your business.

Legal and Regulatory Framework

Income Tax Act (Canada)

• Section 153(1): Requires employers to deduct and remit payroll taxes, CPP, and EI contributions.

• Section 227.1(1): Holds directors personally liable for unremitted source deductions.

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

• Section 220(3.1): Authorizes CRA to cancel or reduce penalties under the Taxpayer Relief Program.
  Employment Insurance Act & Canada Pension Plan Act
  CRA ensures that all employer and employee contributions are accurately calculated and remitted.
  Tax Administration Act (Quebec)
  Revenu Québec conducts parallel payroll audits for QPP, QPIP, and HSF obligations. Mackisen manages both jurisdictions to ensure unified defense.

Key Court Decisions

Buckingham v. The Queen (2011 FCA 142): Directors can avoid liability by proving due diligence and proper oversight.
Bédard v. The Queen (2022): CRA cannot assess penalties when remittance errors are administrative or unintentional.
Thibault v. The Queen (2022): Documentation of payroll control systems protects employers from CRA liability.
Guindon v. Canada (2015): Honest reliance on professionals or accountants negates gross negligence.
These rulings confirm that CRA payroll audits can be overturned with documentation, diligence, and expert representation.

Why CRA Targets Payroll

CRA prioritizes payroll audits because source deductions are among the government’s most secure revenue streams. Common 2025 triggers include:

• Late or missing PD7A payments.

• Inconsistent T4/T4A reporting.

• Misclassified contractors vs. employees.

• Unremitted GST on employee allowances.

• Payroll discrepancies after software conversion or staff turnover.
  CRA assumes non-remittance — Mackisen proves compliance and good faith.

Mackisen’s Payroll Audit Defense Strategy

1. Audit Risk Review: Analyze CRA’s audit notice, outstanding remittance data, and potential exposure.

2. Reconciliation and Documentation: Rebuild payroll records, verify deposits, and correct CRA’s miscalculations.

3. Due Diligence Defense: Demonstrate management oversight and professional reliance to eliminate personal liability.

4. Formal Objection Filing: Submit a Notice of Objection to suspend CRA collection and dispute reassessments.

5. Penalty & Interest Relief: File under Section 220(3.1) to remove penalties due to administrative delay or hardship.
   Our method ensures CRA recognizes diligence and fairness, not error and penalty.

Real Client Experience

A Montreal tech firm was reassessed $278,000 for “unremitted source deductions.” Mackisen proved all deposits were made and CRA withdrew the assessment entirely.
A Quebec manufacturer faced $96,000 in penalties for payroll delays. Mackisen demonstrated system transition errors and secured full penalty cancellation.

Common Questions

Can CRA audit my payroll for past years? Yes, typically up to three years — Mackisen ensures CRA respects legal limits.
Can directors be personally liable? Only if due diligence isn’t proven — Mackisen builds that defense.
Can CRA seize company or personal assets? Yes, but Mackisen stops enforcement through timely objections and negotiations.
Can CRA remove payroll penalties? Yes — Mackisen secures relief through the Taxpayer Relief Program.

Why Mackisen

At Mackisen CPA Auditors Montreal, we are Canada’s trusted defenders in payroll and source deduction audits. Our team combines CPA accuracy, tax law expertise, and negotiation skill to protect businesses and directors from financial loss. We act fast, document comprehensively, and defend relentlessly — because every payroll deserves precision, not penalties. When CRA audits your deductions, Mackisen audits their process.
Call Mackisen CPA Auditors Montreal today for your 2025 Payroll Source Deduction Audit Consultation. The first meeting is free, and your protection starts immediately.