Trust accounts examinations - Payroll and GST/HST account reviews

1. Your account is being reviewed by a Trust Accounts Examination Officer

   Timeline: Day 1

   The CRA will contact you (or your authorized representative) to inform you that your program account is being reviewed by a Trust Accounts Examination Officer.

   Using an authorized representative

   Even if a professional tax preparer completed your GST/HST or payroll returns (for example, T4 slips and T4 summary) on your behalf, you are responsible for making sure your business meets all its payroll and GST/HST tax obligations. Generally, tax preparers will use the information you give them to prepare your remittance amounts and information returns, but they may not be aware of all your tax obligations. This is why the CRA may contact you directly for the review.

   If the CRA sends a letter to the authorized representative asking for information about one of their clients, the authorized representative must respond by the date mentioned in the letter.

   If you choose to authorize a representative

   You can use different methods to authorize a representative.

   Learn more: How to give authorization.

   Why the CRA may review your account

   The CRA may review your account based on various factors, including but not limited to the following:

   • You remit (pay) late or you do not make your payroll payments

     Learn more: When to remit (pay)

   • You file late or you do not file your T4 and T4A information returns

     Learn more: When to file information returns

   • You file late or you do not file your GST/HST returns

     Learn more: When to file GST/HST returns

   • You did not respond to a PD4R notice

     Learn more: Tax deduction, CPP and EI discrepancy notice (PD4R)

   • You received a CPP/EI ruling confirming a worker’s employment status and whether the employment is insurable, pensionable or both which requires changes to your reporting or withholding obligations.

     Learn more: Have you received a CPP/EI ruling

   • Your employee disputes amounts you paid them or the time period they worked for you
   • A shareholder of your business is attempting to change the reporting of their income or the nature of the income paid (for example: from salary to dividends)

     Learn more: Make corrections after filing

   • The CRA received a request from Employment and Social Development Canada (ESDC) to confirm the earnings information provided by a worker applying for employment insurance

     Learn more: Administration of the Canada Pension Plan and the Employment Insurance Act

   • Your business temporarily or permanently stop business operations, including if you stop operating because of a receivership or bankruptcy

     Learn more: Calculate payroll deductions and contributions

   The default method for most businesses to receive correspondence is now online. The CRA recommends signing into My Business Account, access Notification Preferences in your Profile to ensure your email address is up to date. This allows the CRA to notify you when important changes are made on your account and when you have mail to view in My Business Account.

   Learn more: Sign in to your CRA account

   Methods by which the CRA may contact you

   By phone

   Confirm the call is from the CRA officer

   If the CRA calls you (or your authorized representative), the CRA officer assigned to your case will identify themselves when they contact you by phone. Before providing any information over the phone:

   1. Tell the caller you would like to first verify their identity
   2. Request and take note of their name, phone number and office location

   If you doubt the call is from a legitimate CRA officer, end the call and contact the CRA from the CRA's list of phone numbers and ask an agent to confirm the officer’s identity.

   Details of the examination

   The officer will ask you specific questions related to your account to confirm you are authorized on the account. Once the officer has confirmed you are the person authorized for the account, they will provide you with the following:

   • The program account number being reviewed
   • The purpose of the examination
   • The period under review
   • The timeline for the next step of the examination

   
   

   By sending a letter

   Details of the examination

   If the CRA sends you (or your authorized representative) a letter, the following information will be included:

   • The name of the CRA officer assigned to the case and their phone number
   • The program account number being reviewed
   • The purpose of the examination
   • The period under review
   • The timeline for the next step of the examination

   
   

   Online mail

   If you signed up to receive email notifications from the CRA, you (or your authorized representative) may receive an email to let you know that you have mail to view in My Business Account.

   Type of documents you may receive for this examination

   Examples of mail you can receive online include:

   • Letter: Advise meeting has been arranged or request phone contact
   • Letter: Confirm meeting for an examination
   • Letter: Advise of failure to deduct
   • Letter: Request books and records be submitted through online services for desk examination
   • Other type of documents, statements or CRA letters

        CRA sign-in     

   By email

   For security reasons, the CRA officer cannot contact you directly by email.

   Learn more: Recognize a scam - Why the CRA may contact you

   Collaborating with the CRA officer assigned to your case

   Once you are satisfied regarding the identity of the CRA officer, the CRA recommends that you answer the questions from the officer to the best of your ability. Collaborating with the officer will lead to a smooth and efficient review process.

   Your rights during the process

   The CRA operates on the fundamental belief that you are more likely to comply with the law if you have the information and other services that you need to meet your obligations.

   The CRA wants to make sure you understand and can exercise your rights.

   Learn more: Taxpayer Bill of Rights.

2. Preparing for the examination

   Timeline: Generally, you have up to 15 days to prepare

   The CRA officer will contact you (or your authorized representative) to begin the examination process.

   The time provided to prepare will give you the chance to make sure that your documents are accurate, complete, and organized to facilitate a smooth examination process.

   Methods by which the CRA officer may contact you

   The CRA officer may call you (or your authorized representative) or send you a letter to provide the following information:

   • The examination will be conducted, either:

     In person

     The CRA officer will provide the date, time and address when the CRA officer will visit you.

     Generally, your documents will be requested and examined at your place of business.

     Online

     The CRA officer will provide the due date to submit your books and records online if there is no in person examination. The CRA officer will not visit you but may contact you to discuss the documents received.

     Your electronic books and records will be examined at their CRA office.

   • The specific books and records you must provide

   Books and records you must provide

   Once you receive the request from the CRA officer for specific books and records, you are legally required to provide your documents for this examination. The scope of the examination is based on issues identified by the CRA.

   Types of books and records

   The CRA may ask for various types of books and records, including but not limited to the following:

   General: Payroll or GST/HST examination

   Accounts receivable and payable (ledgers and journals)

   These records, including bank deposit books, provide information regarding the cash flow and assets of your business.

   Bank statements, cancelled cheques, cheque register

   These records provide information regarding the cash flow and balances of your business. The records also provide:

   • Verification for information in the salary and/or wage journal (for example: dates, amounts, endorsements)
   • Proof of payment where remittances may be missing from the CRA systems
   • Information that may indicate payments which should have been included in payroll but were not (for example: taxable benefits, casual workers)

   Cash disbursements and cash receipts journal

   These records (including the petty cash journal) may provide:

   • Information that may indicate payments which should have been included in the payroll but were not (for example: taxable benefits, amount paid to casual workers)
   • Information that may lead to a referral to another CRA area (for example: possible referral to CPP/EI Rulings Division)

   Current financial statements

   The current balance sheet and income statement will provide:

   • An overall view of the profitability, extent of operations, net worth, assets and liabilities
   • Salaries, wages, management salaries and sub-contract costs expensed
   • Owner's equity and shareholder loans

   General ledger and general journal

   This ledger/journal provides information such as:

   • A summary of all of your financial record-keeping
   • Information pertaining to shareholder loan accounts, vehicles, equipment, and inventory
   • Information and payments to subcontractors

   Corporate documents

   These records provide:

   • The correct name of the corporation
   • Type of charter held, for example, federal or provincial
   • The minutes of shareholders meetings
   • The name and addresses of the shareholders and directors
   • The number of shares held by each shareholder (this helps to establish the percentage of the voting shares controlled by each shareholder)

   Specific: Payroll examination

   Salary and/or wage journal

   This journal (manual or electronic) provides:

   • Gross and net amounts paid to employees, including overtime pay, incentive bonuses, taxable benefits, commissions and more
   • Amounts deducted and to be remitted for income tax, CPP and EI
   • Pay period dates and pay dates, including summaries for weekly, bi-weekly, semi-monthly and monthly pay frequencies
   • Summary of amounts which should have been remitted to the Receiver General, including the total employee and employer portions of CPP and EI
   • Dates when remittances are due
   • Information about employees or other workers information relevant to withholding requirements

   When reviewing the salary and/or wage journal, the CRA examines the:

   • Province in which the employee reports for work or if they have an arrangement to work remotely
   • Calculation of gross salary including overtime pay, and incentive bonuses

   T4 slips and summaries

   The CRA compares the T4 information return they received with the employer’s records with the T4 information return on file for any differences. The CRA will request the T4 return if it has not been filed.

   T4A slips and summaries

   The CRA compares the T4A information return they received with the payer’s records with the T4A information return on file for any differences. The CRA will request the T4A return if it has not been filed.

   Documents relating to taxable benefits

   The CRA examines all documents to make sure you are correctly calculating, reporting, and remitting taxes related to taxable benefits for all employees, shareholders, directors, and other persons.

   This examination will also confirm all of the following:

   • You correctly classified the benefits as either taxable or non-taxable
   • You withheld the correct amounts of income tax, CPP contributions, and EI premiums deductions and you remitted these amounts to the CRA on any taxable benefits
   • The taxable benefits are correctly included in your employees’ T4 slips and included in their employment income

   Documents relating to other workers paid

   The CRA officer may need the following documentation to make sure workers are properly categorized (employee vs self-employed) and may request a CPP/EI ruling to confirm their employment status:

   • Employment contract or agreement: Copy of any contracts or agreements between you and the worker, detailing the terms of employment or the services being provided
   • Worker information: Details about a specific worker (social insurance number or business number for anyone who is in your employment or who is subcontracting for your business) and their contact information, including their job title, duties, and work schedule, to determine the nature of the employment relationship
   • Payment records: Payroll records or other documents that show how the worker is paid, including any deductions for CPP and EI
   • Employment practices: Any documentation on how the worker operates within the business (for example: level of control, tools provided, degree of integration into the business) to help determine the worker's classification
   • Supporting documents: Any additional documentation that clarifies the nature of the work relationship (for example: T4 slips)

   Form TD1, Personal Tax Credits Return

   The CRA examines the TD1 to verify the calculation of the employee’s income tax deductions and as evidence that:

   • The individual is actually an employee of the business
   • Each employee has a social insurance number

   All provinces and territories have their own personal tax credits return that must also be completed if they are claiming more than the basic personal amount to make sure the correct amount of provincial tax is withheld.

   Form TD1-IN, Determination of Exemption of an Indian’s Employment Income

   The CRA examines the TD1-IN to confirm whether the tax exemption under s. 87 of the Indian Act applies to your First Nations employee’s employment income.

   Form TD1X, Statement of Commission Income and Expenses for Payroll Tax Deductions

   Employees who are paid in whole, or in part, by commission can choose to complete this form.

   The CRA examines the TD1X to verify the:

   • Rate of tax to be deducted from commission income
   • Employee's prior year income and expenses or the estimated amounts for the current year
   • Employee's estimated annual taxable income
   • Employee's personal information, for example, address and social insurance number

   Form TD3F, Fisher's Election to have Tax Deducted at Source

   The CRA examines the TD3F to confirm the fisher had elected to have income tax deducted and to make sure that the fisher's personal information is accurate and complete (for example: address and social insurance number).

   Form CPT30, Election to Stop Contributing to the Canada Pension Plan, or Revocation of a Prior Election

   The CRA examines the CPT30 to confirm whether the employee over 65 has made a valid election to stop contributing to the Canada Pension Plan or has revoked a valid election as part of determining whether your withholding of CPP deductions was correct.

   Specific: GST/HST examination

   GST/HST returns for outstanding periods

   The CRA examines outstanding periods to make sure you are correctly reporting GST/HST, collecting GST/HST and filing GST/HST returns.

   Sales invoices, purchase invoices and summaries for outstanding periods

   These records confirm:

   • If you should have charged the GST/HST on taxable sales or if you should have reported these amounts in your outstanding returns
   • You are not over-claiming ITCs or underreporting the GST/HST collected

   In addition to the above books and records, the CRA may ask for input from your accountant, bookkeeper or employees, about information that relates to the books and records and what was reported in your information returns.

   How long should you keep your payroll and GST/HST records

   Your payroll and GST/HST records must be kept organized. Your records must be made available to the CRA when they ask to see them.

   Learn more: Where to keep your records, for how long and how to request the permission to destroy them early

3. Examination of your books and records

   Timeline: Generally, your examination takes place within 30 days

   The time it takes to complete the examination of your books and records varies. There may be delays because of the following:

   • Availability and accuracy of your documents
   • Complexity of your business
   • CRA officer needs to consult with other areas of the CRA

   The CRA officer will keep you informed on the status of the examination.

   How your T4/T4A slips and summaries help the CRA officer for this examination

   • T4 slips and summaries

     The CRA examines the T4 information return to:

     • Compare a random sample of the gross salary and/or wages, taxable allowances and benefits and registered pension plan deductions reported to the amounts shown in the salary and/or wage journal
     • Reconcile the total wages for the year as recorded in the salary and/or wage journal with the total wages reported on the summary form
     • Reconcile the total deductions for the year as recorded in the salary and/or wage journal to the amount on the T4 slips
     • Make sure that bonus payments and amounts paid after the end of the calendar year are reported by the recipient as income in the year they were received
     • Make sure that all taxable benefits and other income are reported

   • T4A slips and summaries

     The CRA examines the T4A information return to:

     • Make sure that all tax deductions from other income have been reported and remitted to the Receiver General
     • Make sure that all self-employed commissions paid to a self-employed worker have been properly reported
     • Reconcile the total deductions for the year to the amount on the T4A slips

   Methods of the examination

   In person

   Generally, the CRA officer will examine your books and records at your place of business. The CRA officer may also examine them at an alternate location (for example: your authorized representative’s office or the officer will borrow your documents to complete the examination at a CRA office).

   Confirm the visit is from the CRA authorized officer

   If the CRA officer visits you (or your authorized representative), the CRA officer will identify themselves. Before providing any information:

   1. Tell the person you would like to first verify their identify
   2. Request that they show their CRA authorization card (RC121A) to prove that they are a representative of the CRA (this card includes their name, photo and badge number)

   If you doubt the visit is from a legitimate CRA officer, contact the CRA from the CRA's list of phone numbers and ask an agent to confirm the officer's identity.

   When to provide the required documents

   If your books and records are available electronically, the CRA officer may ask you to submit the documents online before or after meeting with you. This usually speeds up the examination process and leads to less time spent at your place of business.

   If electronic records are not available, or physical records are required, the CRA officer will either:

   • Examine the documents at your place of business or representative’s office.
   • Borrow the documents that are required for further examination.
     What if the CRA borrows your books and records

     To borrow your books and records, the CRA officer will:

     • Complete a T2213 receipt identifying the borrowed books, records and documents
     • Provide you with a copy of the receipt

     When the documents are returned, the CRA officer will request that you sign on the receipt acknowledging you received the books and records.

   What if you cannot get the documents

   If you cannot get the documents by the date requested, call the CRA officer assigned to your case at the number provided in your letter to request additional time. The CRA officer assigned to your case will determine if this is possible.

   If you no longer have the requested books and records, the CRA officer can assist you in finding alternate methods to confirm the amounts reported on your slips and summaries. For example, you could obtain copies from a third party involved in a transaction (a financial institution or a supplier).

   After the deadline, if the required books and records are not provided to the CRA officer, they will make adjustments to your account based on the information the CRA officer has available.

   
   

   How to submit your documents online

   To send your documents using our online services:

   1. Click “Submit documents” in the Correspondence menu and then click “Submit documents” at the bottom of the page
   2. Click “Start” and answer “No” to the question “Do you have a case or reference number?”
   3. Select “More topics” from the Topic menu
   4. Select “Submit documents to support a Trust Accounts Examination”
   5. Select the “Program account number” associated to the documents you are submitting and click “Next”
   6. Click “+ Attachments” to attach your documents and use the “Browse” button to choose the file(s) you want to attach from your device (if more than one file is being added, each must have a unique name)
   7. Enter the name of the Trust Accounts Examination Officer assigned to your case in the blank field “Provide a brief description of your document” and click “Upload file(s)”
   8. If you want to attach more documents, click “+Attachments” again and repeat steps 2-3 and when all your documents are added, click “Next”
   9. Review and click “Submit”

   Keep the confirmation page for your records. You cannot use the case number on this page to send additional documents to the CRA.

        CRA sign-in     

   Learn more: Submit documents online

   The CRA does not accept documents by email

   For security reasons, you cannot send documents directly by email.

   Learn more: Recognize a scam - Why the CRA may contact you

   Online

   The CRA officer will examine your books and records electronically at their CRA office. The CRA officer will not visit you at your place of business during this examination.

   Confirm the call is from the CRA officer

   If the CRA calls you (or your authorized representative), the CRA officer assigned to your case will identify themselves when they contact you by phone. Before providing any information over the phone:

   1. Tell the caller you would like to first verify their identity
   2. Request and take note of their name, phone number and office location

   If you doubt the call is from a legitimate CRA officer, end the call and contact the CRA from the CRA's list of phone numbers and ask an agent to confirm the officer’s identity.

   Details of the examination

   The officer will ask you specific questions related to your account to confirm you are authorized on the account. Once the officer has confirmed you are the person authorized for the account, they will provide you with the following:

   • The program account number being reviewed for examination
   • The purpose of the call

   When to provide the required documents

   The CRA officer will provide you with a deadline to submit your documents online.

   
   

   What if you cannot get the documents

   If you cannot get the documents by the date requested, call the CRA officer assigned to your case at the number provided in your letter to request additional time. The CRA officer assigned to your case will determine if this is possible.

   If you no longer have the requested books and records, the CRA officer can assist you in finding alternate methods to confirm the amounts reported on your slips and summaries. For example, you could obtain copies from a third party involved in a transaction (a financial institution or a supplier).

   After the deadline, if the required books and records are not provided to the CRA officer, they will determine the next steps based on your case:

   • Arrange to examine your books and records at your place of business (in person examination)
   • Make adjustments to your account based on the information the CRA officer has available.

   
   

   How to submit your documents online

   To send your documents using our online services:

   1. Click “Submit documents” in the Correspondence menu and then click “Submit documents” at the bottom of the page
   2. Click “Start” and answer “No” to the question “Do you have a case or reference number?”
   3. Select “More topics” from the Topic menu
   4. Select “Submit documents to support a Trust Accounts Examination”
   5. Select the “Program account number” associated to the documents you are submitting and click “Next”
   6. Click “+ Attachments” to attach your documents and use the “Browse” button to choose the file(s) you want to attach from your device (if more than one file is being added, each must have a unique name)
   7. Enter the name of the Trust Accounts Examination Officer assigned to your case in the blank field “Provide a brief description of your document” and click “Upload file(s)”
   8. If you want to attach more documents, click “+Attachments” again and repeat steps 2-3 and when all your documents are added, click “Next”
   9. Review and click “Submit”

   Keep the confirmation page for your records. You cannot use the case number on this page to send additional documents to the CRA.

        CRA sign-in     

   Learn more: Submit documents online

   The CRA does not accept documents by email

   For security reasons, you cannot send documents directly by email.

   Learn more: Recognize a scam - Why the CRA may contact you

4. Results of the examination

   Timeline: Generally, the results are given to you the same day if in person or within 15 days if the results are sent by mail

   1. Once the CRA officer has finished reviewing your books and records, they will discuss with you the results of the examination either in person or by phone.

      Common changes to your T4 or T4A returns after an examination

      The following is a list of the most common changes to your T4 or T4A returns the CRA officer can make once they finished reviewing your books and records:

      • Amend or add T4 slips

        The CRA officer may amend your T4 slips to correct the reporting by increasing or reducing the amount reported on the slip.

        They may also add T4 slips when a slip was not originally filed or when the employment status has been determined to be different from how it was reported on the original slip.

        Changes are most commonly made to the following boxes or codes:

        • Total employment income (box 14)
        • Income tax deducted (box 22)
        • CPP contributions (box 16)
        • EI premiums (box 18)
        • Insurable and pensionable earnings (box 24 and box 26)
        • Taxable benefits (codes 30, 32, 33, 34, 36, 38, 40 or 90 )

      • Amend or add T4A slips

        The CRA officer may amend your T4A slips to correct the reporting by increasing or reducing the amount reported on the slip.

        They may also add T4A slips when a slip was not originally filed or when the employment status has been determined to be different from how it was reported on the original slip.

        Changes are most commonly made to the following boxes or codes:

        • Self-employed commissions (box 020)
        • Income tax deducted (box 022)
        • Other income (code 028)

   2. If the results of the examination are provided by phone, you will receive a letter to inform you the CRA officer has completed the examination. You will also receive one or both of the following statements of account that provide the results of the examination:

      • PD83-1, Payroll examination Statement of Account (if applicable)
      • GST501, Statement of Account - GST/HST Examination (if applicable)

      The CRA officer will provide these statements of account to the legal entity and not to the authorized representative. Copies will only be provided to the authorized representative if you specifically request it.

      If you failed to report income or taxable benefits properly, you will also receive a copy of the following documents with the letter:

      • Additional or amended T4 or T4A slips (you must send copies 2 and 3 of all slips to the workers concerned, and keep copy 1 for your records)

      If you failed to deduct CPP contributions and EI premiums properly, you will also receive a copy of the following documents with the letter:

      • PD86, Statement of Discrepancies
      • Additional or amended T4 slips (you must send copies 2 and 3 of all slips to the workers concerned, and keep copy 1 for your records)

      Paying a total amount owing

      As the trust account examination reviewed payroll deductions and GST/HST collected that you did not remit by their due date, the total amount owing on the statement is past due and payable immediately.

      You are required to provide the payment in full for the balance owing to the CRA officer once you receive your statements of account.

      If you are not able to pay the total amount owing, you may set up a payment arrangement with the CRA.

      Learn more: Debt collection at the CRA.

   3. If an assessment is required, you will receive a notice of assessment (NOA) separately with the balance owing. The notice will provide a summary of the breakdown of that balance, including any previous arrears balance, and any penalties or interest applied to overdue payments.

      Learn more:

      • Notice of assessment (PD7D)
      • After you file - Complete and file a GST/HST return

      What if you disagree with the NOA

      If you disagree with the assessment, you may want to register a formal appeal or dispute.

      Learn more: Objections, appeals, disputes, and relief measures

References