Insights
Oct 25, 2025
Mackisen
CRA TOSI Audit 2025 — Protect Your Family Business, Reverse CRA Reassessments, and Stop Income Splitting Penalties
In 2025, CRA’s Tax on Split Income (TOSI) Audit Program has intensified nationwide, targeting family-owned corporations, professional firms, and holding companies. CRA’s AI audit tools now cross-match every dividend, salary, and shareholder payment made to family members to detect “unreasonable income allocations.” Even legitimate family businesses that follow Canada’s TOSI rules are being penalized for honest structuring. These audits often result in reclassified income, denied deductions, and double taxation for families who did nothing wrong. At Mackisen CPA Auditors Montreal, we defend family corporations and shareholders from unfair TOSI reassessments. Our CPA auditors and tax lawyers prove active participation, justify business purpose, and eliminate penalties. We don’t let CRA mistake family collaboration for abuse — we defend your family legacy with law and precision.
Legal and Regulatory Framework
Income Tax Act (Canada)
Section 120.4: Defines and enforces TOSI rules for income received from related corporations.
Section 18(1)(a): Allows deduction of legitimate salaries and business expenses.
Section 67: Requires all payments to family members to be reasonable in relation to services rendered.
Section 163(2): Imposes gross negligence penalties, which Mackisen cancels with evidence of compliance.
Section 220(3.1): Permits CRA to cancel or reduce penalties and interest under the Taxpayer Relief Program.
Tax Administration Act (Quebec)
Revenu Québec applies parallel TOSI provisions for provincial taxation. Mackisen ensures both agencies are aligned to avoid overlapping reassessments.
Key Court Decisions
Bédard v. The Queen (2022): CRA must prove lack of active involvement before applying TOSI.
Thibault v. The Queen (2022): Salaries and dividends to family members are valid if business contribution is documented.
Guindon v. Canada (2015): Honest reliance on professional advice eliminates gross negligence penalties.
Jordan v. The Queen (2009): CRA cannot deny family income splitting without evidence of avoidance intent.
These precedents confirm that CRA must base TOSI assessments on facts and contribution — not assumption or family ties.
Why CRA Targets Family Corporations
CRA uses automated matching to flag families distributing income between spouses and children. Common 2025 triggers include:
Dividends paid to non-active family members.
Management fees to relatives without documentation.
Family shareholders under age 25 receiving investment income.
Corporate reorganizations shifting share ownership.
Sudden income changes among related parties.
CRA assumes avoidance — Mackisen proves contribution and intent.
Mackisen’s TOSI Audit Defense Strategy
Audit File Review: Examine CRA’s reassessment and identify errors in income attribution.
Contribution Proof: Compile logs, contracts, and payroll evidence showing family members’ work or management roles.
Reasonableness Validation: Benchmark compensation against industry standards to demonstrate fairness.
Formal Objection Filing: Submit a Notice of Objection to stop enforcement and dispute reassessment.
Penalty & Interest Relief: Apply under Section 220(3.1) to cancel penalties related to TOSI disputes.
Our approach transforms CRA’s assumptions into verifiable, lawful business practices.
Real Client Experience
A Montreal family corporation was reassessed $264,000 after CRA denied spousal dividends. Mackisen proved management participation and CRA dropped the reassessment entirely.
A Quebec professional firm faced $112,000 in TOSI penalties for dividends to adult children. Mackisen demonstrated active roles and CRA reversed all penalties.
Common Questions
Can CRA tax my spouse’s or child’s dividends under TOSI? Only if they were not actively involved — Mackisen proves contribution to protect your family.
Can CRA audit past years under TOSI? Yes, up to ten years — Mackisen enforces time limits and prevents overreach.
Can family trusts trigger TOSI? Yes, but Mackisen structures them correctly to avoid reassessment.
Can CRA remove TOSI penalties? Absolutely — Mackisen files taxpayer relief requests for complete cancellation.
Why Mackisen
At Mackisen CPA Auditors Montreal, we are Canada’s foremost experts in defending family businesses and shareholders against TOSI audits. Our integrated CPA and legal team ensures your family income is protected, your structure remains compliant, and your reputation stays intact. We act fast, prove participation, and restore fairness — because working with family should never feel like fighting one. When CRA audits your family corporation, Mackisen audits their fairness.
Call Mackisen CPA Auditors Montreal today for your 2025 TOSI Audit Defense Consultation. The first meeting is free, and your protection starts immediately.
