CRA Payroll Source-Deduction Audit — Montreal CPA Firm Near You: CPP/EI/Tax Remitted

A CRA Payroll Source-Deduction Audit is one of the most important compliance reviews for employers. It determines whether your company has correctly withheld, remitted, and reported all employee deductions — including CPP, EI, income tax, and QPP/QPIP in Québec.
Mackisen CPA Montreal helps businesses defend and prepare for payroll audits by reconciling every remittance, protecting directors from personal liability, and ensuring your payroll system meets both CRA and Revenu Québec requirements.

Legal Foundation

Law: Income Tax Act s.153 (source deductions); Canada Pension Plan s.21; Employment Insurance Act s.82; Tax Administration Act (Québec) arts.40–44; LAF s.227.1 (director liability).
Jurisprudence: Soper v. Canada (1997 FCA) — established that directors can be personally liable for unremitted payroll deductions if they fail to demonstrate due diligence.

Learning insight: Payroll isn’t just accounting — it’s fiduciary. CRA considers every dollar withheld a trust fund belonging to the government.

Why CRA and Revenu Québec Conduct Payroll Audits

Payroll audits are triggered when tax agencies detect inconsistencies between remittances, T4/RL-1 slips, and financial statements. These audits ensure all deductions are properly calculated, paid, and filed.
Common triggers include:

• Late or missing remittances.

• Contractor payments that resemble employment income.

• Differences between T4 summaries and PD7A reports.

• Employee benefits (vehicles, housing, allowances) not included in taxable income.

• Corporate insolvency or financial distress.

Learning insight: CRA doesn’t audit payroll to find fraud — it audits to confirm control. Mackisen CPA ensures your system proves both compliance and oversight.

How CRA Payroll Audits Work

1. Audit Notification: CRA requests payroll registers, remittance receipts, and T4/T4A slips.

2. Records Examination: CRA tests deductions for accuracy, timing, and proof of payment.

3. Employee Verification: Auditors confirm status, wages, and taxable benefits.

4. Contractor Review: CRA applies the Wiebe Door test to verify true independence.

5. Assessment: CRA issues reassessments for unpaid deductions or penalties.

Learning insight: Payroll audits are rarely about one mistake — they’re about systems. Mackisen CPA rebuilds that system before CRA reviews it.

Mackisen CPA’s Payroll Audit Defense Strategy

1. Full Reconciliation: Align all CPP/EI/QPP/QPIP deductions with CRA and ARQ remittance records.

2. Employee Classification Review: Validate contractor vs. employee relationships with supporting documentation.

3. Director Liability Defense: Prepare due-diligence files to shield directors under s.227.1 ITA.

4. Benefit Verification: Confirm inclusion of all taxable benefits (cars, health plans, bonuses).

5. Penalty Relief and Appeal: File Taxpayer Relief applications and manage objections when errors were unintentional.

Learning insight: Payroll defense isn’t reactive — it’s preventive. A CPA ensures your audit response is stronger than the audit itself.

Penalties and Exposure in Payroll Audits

CRA and ARQ can impose severe consequences for payroll mismanagement:

• Interest and Penalties: 3%–10% for late or incomplete remittances.

• Repeat Penalties: Up to 20% for second infractions within 12 months.

• Director Liability: Personal exposure for unremitted taxes and benefits.

• Gross Negligence Penalties: For falsified or missing T4/RL-1 slips.

Learning insight: Payroll audits test both precision and ethics. Mackisen CPA ensures you’re protected on both fronts.

Real Case Example

A Montréal construction company faced $82,000 in payroll penalties for late QPP/QPIP remittances. Mackisen CPA reconstructed payment history, corrected reporting errors, and filed a Taxpayer Relief submission — resulting in full penalty cancellation and refund of overpaid interest.

Learning insight: CRA rewards diligence — not perfection. Mackisen CPA proves diligence through documentation and defense.

SEO Optimization and Learning Value

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Secondary Keywords: CRA director liability payroll, Revenu Québec source deductions, Mackisen payroll audit defense, CRA PD7A reconciliation, T4 RL-1 correction Montréal.

Learning insight: Payroll systems and SEO both reward structure — consistency, documentation, and clarity. Mackisen CPA builds all three.

Why Mackisen CPA Montreal

With over 35 years of combined experience in payroll audits and CRA defense, Mackisen CPA Montreal is Québec’s trusted partner for employer compliance. Our bilingual team handles every stage — from pre-audit review to CRA correspondence and appeal.
We ensure your payroll records are accurate, your directors are protected, and your organization meets every statutory requirement.

Learning insight: Payroll compliance is more than obligation — it’s leadership. Mackisen CPA makes your organization a model of both.