Out of the three major business audit categories:
- Income audit (suspicious income or expenses claim)
- HST audit (non-compliance of sales tax)
- Payroll audit
The penalties on payroll audit are way more heavy than the others. So let’s take a closer look at payroll audit.
What causes a payroll audit?
- Late or missing payroll tax remittance (payroll tax consists of CPP, EI, and the employees’ income taxes)
- Incorrect determination of the employment status, for example a business issues T4A to an associate who is identified to be a full time or part-time employee (T4)
- Incorrect calculation or ruling to CPP, EI, vacation pays, etc
- Incorrect payroll to family members, arm-length relations, and senior employees
- Non-resident worker to be hired
- Presence of personal use of employer assets such as taxable benefit and allowances including interest-free or low-interest loans, tuitions, use of company cars or cell phones, etc
What documents that are required for the audit?
- Proof of payment to the employees
- Proof of payroll tax payment to CRA
- Employment records
- Bank statement
After the audit
Only 2 possible results. “No change” means you are doing well so the payroll audit case will be closed with no further action required. Congratulations.
“Changes need to be made” means problems are found in the payroll audit so a decision letter will be issued letting you know how much taxes, penalty, and interest you will need to pay.
What we can do
- We can take over all the communication on behalf of you to the CRA from the beginning of the audit process
- We review your previous payroll details and your current payroll situations
- We walk you through the entire process, facilitate submission of documents, accompany you or represent you to audit meetings
- We challenge CRA’s decision letter
- We minimize penalties and interest
- If you agree with the assessment after the payroll audit, we represent you and bring the process to the next stage – Appeals.