CRA Worker Classification Audit — Montreal CPA Firm Near You: Employee vs Contractor

A CRA Worker Classification Audit determines whether individuals you pay are truly independent contractors or legally employees. The distinction matters — because if CRA or Revenu Québec reclassifies contractors as employees, your company could owe up to four years of back payroll taxes, CPP/EI, QPP/QPIP, and penalties.
Mackisen CPA Montreal helps employers across Québec prepare for and defend worker-status audits, ensuring every relationship is properly documented, compliant, and protected under federal and provincial law.

Legal Foundation

Law: Income Tax Act s.5 & s.9 (employment vs. business income); Canada Pension Plan s.21; Employment Insurance Act s.82; Tax Administration Act (Québec) arts.40–44.
Jurisprudence: Wiebe Door Services Ltd. v. MNR (1986 FCA) — established the fourfold test: control, ownership of tools, chance of profit, and risk of loss.

Learning insight: CRA doesn’t decide worker status based on the contract — it decides based on conduct.

Why CRA and ARQ Audit Worker Status

Both agencies monitor payroll and T4A filings for signs of misclassification. When a “contractor” operates under company supervision or relies on one client for income, auditors may decide they’re employees.

Common triggers for worker-status audits include:

• Large or repeated T4A slips issued to the same person.

• Workers paid without CRA payroll accounts.

• Anonymous tips or EI/CPP claims by contractors.

• Contracts lacking independence clauses.

• Industries with frequent disputes: construction, IT, transportation, cleaning, consulting.

Learning insight: Worker audits don’t start with fraud — they start with inconsistency. Mackisen CPA makes your documentation consistent and defensible.

The Consequences of Misclassification

If CRA or ARQ reclassifies contractors as employees, employers face:

• Retroactive payroll deductions for up to four years.

• CPP, EI, and QPP/QPIP contributions plus interest and penalties.

• Reassessment of HSF contributions and CNESST premiums.

• Risk of director liability under s.227.1 ITA and LAF art.40.

Learning insight: Misclassification isn’t a paperwork issue — it’s a financial exposure. Prevention costs less than correction.

What Mackisen CPA’s Worker-Status Defense Includes

1. Contract Analysis: Review every contract for control, ownership, and independence criteria.

2. Relationship Audit: Compare agreements to actual work practices (schedule, supervision, client exclusivity).

3. Proof of Independence: Compile invoices, business numbers, insurance certificates, and marketing proof for contractors.

4. Legal & Economic Review: Apply CRA’s Wiebe Door and ARQ’s civil-law criteria.

5. Representation: Communicate directly with auditors to clarify evidence, correct documentation, and prevent reassessment.

Learning insight: CRA audits worker relationships like case studies — Mackisen CPA ensures every story ends with compliance, not correction.

The CRA’s Worker Classification Tests

1. Control Test: Who directs the work?

2. Ownership of Tools: Who owns or maintains equipment used?

3. Risk and Profit: Does the worker bear risk or earn profits like a business?

4. Integration Test: Is the worker’s role essential to your business or independent?

Mackisen CPA applies all four tests to build airtight documentation — ensuring your relationships withstand CRA and ARQ scrutiny.

Learning insight: Employee relationships are defined by dependence; contractor relationships are defined by evidence.

How Mackisen CPA Manages Worker Classification Audits

• Conducts pre-audit diagnostic to identify reclassification risks.

• Builds CPA-certified “independence files” for each contractor.

• Drafts compliant contract templates for future engagements.

• Negotiates with CRA/ARQ to limit audit scope and backdating.

• Files voluntary corrections or relief requests under Taxpayer Relief provisions.

Learning insight: The difference between compliance and chaos is preparation. Mackisen CPA organizes proof before CRA asks for it.

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Learning insight: Worker-status compliance isn’t just about forms — it’s about foresight. Mackisen CPA ensures you pass every test with evidence.

Real Client Success

• A Montréal construction firm avoided $160,000 in back payroll taxes after Mackisen CPA proved subcontractors owned tools, bore risk, and worked for multiple clients.

• A design agency maintained its freelancer network after we revised contracts and created independence files meeting CRA’s control test.

• A logistics company had $90,000 in penalties reversed when Mackisen CPA demonstrated proper QPP/QPIP treatment of true contractors.

Learning insight: CRA doesn’t punish employers who plan — only those who can’t prove they did.

Why Mackisen CPA Montreal

Mackisen CPA Montreal has over 35 years of expertise in tax law, payroll compliance, and CRA/ARQ audit representation. Our bilingual CPA team helps businesses navigate complex worker relationships, prevent costly reclassifications, and stay compliant under both common law and Québec civil law.
We don’t just defend audits — we design systems that keep them from happening again.

Learning insight: A worker-classification audit is not a setback — it’s a stress test. Mackisen CPA ensures your business passes with confidence.