The process
How the Examination Process Works
The CRA describes four stages and publishes indicative timings for each. Individual files can take longer, and these are the agency's general expectations rather than guarantees.
1
Day 1
CRA makes contact
The CRA contacts you or your authorised representative to say the program account is being reviewed by a Trust Accounts Examination Officer.
- Verify the officer's identity first. Ask for their name, phone number and office location, and call the CRA back independently if unsure.
- In person, they must show an RC121A authorisation card with name, photo and badge number.
- Note the program account, the purpose, the periods and the next deadline.
- The CRA will not contact you by email for this.
2
Usually up to 15 days
Preparing
You are told whether the examination will be in person or online, and exactly which books and records to provide.
- Once requested, you are legally required to provide the documents.
- Scope is set by the issues the CRA identified, so send what was asked for rather than everything.
- Reconcile the payroll journal to the T4 return and to the remittances first.
- Reconcile GST/HST returns to the ledger and to the sales records.
3
Usually within 30 days
Examination
The officer reviews the records, either at your place of business or electronically at a CRA office.
- They sample gross pay, allowances and benefits against the payroll journal, then reconcile the year to the T4 summary.
- If the CRA borrows physical records, they complete a T2213 receipt listing what was taken.
- If you cannot meet the date, call the officer and ask for more time. They decide whether to grant it.
- If records are not provided by the deadline, the CRA can adjust the account on the information it already holds.
4
Same day, or 15 days by mail
Results
The officer discusses the outcome with you in person or by phone, and issues statements of account.
- PD83-1 for a payroll examination, GST501 for a GST/HST examination, whichever applies.
- Amended or additional T4 or T4A slips where income or benefits were not reported correctly.
- PD86 Statement of Discrepancies where CPP or EI was not deducted properly.
- A notice of assessment arrives separately if an assessment is required.
The CRA states the full process is generally completed within 60 days. Statements of account go to the legal entity rather than to your representative, so ask us to be copied if you want to see them at the same time you do. If you disagree with an assessment, a formal objection or appeal route is available.
Documents
What Records May Be Requested?
The CRA publishes the categories it may ask for. What you actually receive depends on the accounts, periods and issues under examination. Follow the specific request rather than sending every record you have.
General records
- Accounts receivable and payable ledgers and journals
- Bank statements, cancelled cheques, cheque register
- Cash disbursements and cash receipts journals, including petty cash
- Current balance sheet and income statement
- General ledger and general journal
- Corporate documents: minutes, shareholders, directors, share holdings
- Prior CRA correspondence
Payroll records
- Salary and wage journal, manual or electronic
- T4 and T4A slips and summaries
- Source deduction calculations and remittance confirmations
- Taxable benefit calculations, including automobile and allowances
- Employment contracts and contractor agreements
- Worker details, duties, schedule, and how they are paid
- Forms TD1, TD1-IN, TD1X, TD3F and CPT30 where they apply
GST/HST records
- GST/HST returns, including any outstanding periods
- Sales reports and point-of-sale reports
- Sales invoices and purchase invoices
- Input tax credit documentation
- Reconciliations between returns and the ledger
- Bank statements supporting reported sales
- Summaries for the periods under review
The CRA may also ask your accountant or bookkeeper directly for input about the records and what was reported on your information returns. Records generally need to be kept organised and available on request. This is one of the few situations where having someone who already knows your file saves days rather than hours.
Perspective
How Serious Is a Trust Accounts Examination?
It depends entirely on what the records show. Some examinations close with no material change. Others surface issues that carry real cost. Here is an honest read of where a file usually sits.
Lower concern
- Records are complete and organised
- Returns reconcile to the books
- Differences exist but are explainable
- No material balance appears outstanding
- Remittances were made on time
Moderate concern
- Some documentation is missing
- Remittances were made late
- Taxable benefits were not reported correctly
- Payroll records and T4s do not reconcile
- Input tax credits lack complete support
Higher concern
- Significant unpaid payroll or GST/HST amounts
- Repeated filing or remittance failures
- Material employee versus contractor issues
- Substantial unreported taxable benefits
- Books and records are incomplete
- The corporation may be unable to pay an assessment
- Potential personal exposure for directors
- The examination may expand into a broader audit
What can follow, depending on the findings. Adjustments or assessments. Penalties and interest. Amended T4 or T4A slips that you then have to send to the workers concerned. Collection action if assessed amounts remain unresolved. A referral for a broader review. And, in certain circumstances, personal exposure for corporate directors.
On that last point, be accurate about it: director liability is not automatic. It does not attach simply because an examination has started. It arises in specific circumstances set out in legislation, and whether it applies depends on the facts of the file.
One thing the CRA is direct about: amounts on a statement of account following an examination are treated as past due and payable immediately, because they relate to trust funds that were not remitted when they should have been. If the corporation cannot pay in full, a payment arrangement is the route to discuss.
Immediate steps
What Should You Do Now?
The first few days set the tone for the whole examination. These are the things that consistently help, and the things that consistently make files worse.
✓Do
- Read the entire CRA communication, not just the first paragraph
- Confirm the officer's identity before giving any information
- Write down every deadline the moment you learn it
- Identify exactly which accounts and periods are involved
- Preserve all relevant records, including drafts and working papers
- Reconcile your returns to your accounting records before submitting
- Bring in a professional early, while the scope is still narrow
- Keep a copy of every document you supply and the date you sent it
- Respond accurately and on time, and ask for more time if you need it
×Do not
- Ignore the contact and hope it goes away
- Guess at an answer during a call with the officer
- Alter or recreate records without a clear explanation of what you did
- Send disorganised records without reviewing them first
- Volunteer information or documents outside the scope of the request
- Assume that hiring a representative removes your own obligations
- Promise a payment amount before you understand the exposure
- Send sensitive payroll files through ordinary unencrypted email
If there is a date on your letter, that date is the priority. Tell us what it says and we will explain what it is counting and what has to happen before it. Request a consultation.
Why Brookside
A former CRA auditor on your side of the table
Parm Shergill, CPA · Founder and Principal
Parm spent more than ten years at the Canada Revenue Agency as a GST/HST auditor before founding Brookside CPA. He knows how these files get selected, what an examination officer is testing, and which answers close a file rather than widen it.
You deal with him directly. No handoff to a junior, and no explaining your business twice.
- We read the request the way the CRA wrote itYou send what was actually asked for, and nothing that widens the scope.
- We reconcile before you submitPayroll to T4s to remittances, and GST/HST returns to the ledger, so you know what the officer will find.
- The CRA deals with usOnce authorised, we take the correspondence, the deadlines and the follow-up requests off your desk.
- We fix what caused itRemittance controls, payroll process and a recurring GST/HST reconciliation, so the next period is clean.
Questions
Frequently Asked Questions
It is a CRA review of funds your business holds in trust for the government, meaning payroll deductions withheld from employees and GST/HST collected from customers. The CRA checks that your information returns are correct and complete and that you met your withholding, remitting and reporting obligations. It covers payroll, GST/HST, or both, and it also considers whether workers have been properly characterised as employees or self-employed.
No. The CRA states that the focus of an examination differs from a tax audit because it relates only to your payroll and GST/HST reporting obligations, whereas an audit is a broader review of your books and records. That said, an examination is not automatically minor. If it raises concerns, your business can be referred for an audit, and an examination can still result in assessments, penalties and interest.
Selection does not mean the CRA has concluded anything. The CRA lists factors that may lead to a review, including late or missed payroll remittances, T4, T4A or GST/HST returns filed late or not at all, an unanswered PD4R discrepancy notice, a CPP/EI ruling that changes your obligations, an employee disputing what they were paid, a shareholder changing how income was reported, a request from ESDC, or the business ceasing operations. Routine compliance activity also accounts for some examinations.
It depends on the accounts, periods and issues being examined. Commonly requested items include the salary and wage journal, T4 and T4A slips and summaries, remittance records, taxable benefit calculations, worker contracts and payment records, TD1 forms, GST/HST returns for outstanding periods, and sales and purchase invoices. General records such as the general ledger, bank statements and financial statements are also frequently requested. Follow the specific request rather than sending everything.
The CRA states the full process is generally completed within 60 days. Within that, you usually have up to 15 days to prepare, the examination itself generally takes place within 30 days, and results are given the same day if in person or within 15 days if sent by mail. Individual files take longer where records are incomplete, the business is complex, or the officer needs to consult elsewhere in the CRA.
Yes. Both are trust amounts, so a single examination can cover your payroll program account, your GST/HST account, or both at once. In practice the two often connect: subcontractor payments that raise a worker classification question on the payroll side frequently raise input tax credit questions on the GST/HST side as well.
The officer discusses the results with you and issues a statement of account: PD83-1 for payroll, GST501 for GST/HST. Where income or benefits were not reported correctly you receive amended or additional T4 or T4A slips, which you must then send to the workers concerned. Where CPP or EI was not deducted properly you receive a PD86 Statement of Discrepancies. If an assessment is required, a notice of assessment follows separately with the balance, penalties and interest.
In certain circumstances, yes, but it is not automatic and it does not follow simply because an examination has begun. Director liability for unremitted source deductions and GST/HST arises in specific situations set out in legislation, and whether it applies depends on the facts, including what the director did to prevent the failure. If you are a director and there are unremitted trust amounts, this is worth specific advice early rather than late.
Yes, once you have authorised them on the account. The CRA may still contact you directly, because the business remains responsible for meeting its obligations regardless of who prepared the returns. Note also that if the CRA writes to an authorised representative asking for information, the representative must respond by the date in the letter.
No. The scope of the examination is set by the issues the CRA identified, and you are legally required to provide the documents requested. Sending unrequested material can raise questions outside the original scope and lengthen the process. Equally, do not withhold records that were properly requested. The right approach is a complete, organised response to what was actually asked.
Yes. The CRA states that if the examination raises concerns, the business can be referred for an audit, which is a more detailed examination of all your books and records. This is one reason a well-organised, accurate response at the examination stage matters. Nobody can promise a referral will not happen, but a file that reconciles cleanly gives the officer less reason to escalate.
Verify the officer's identity before providing anything. Write down the program account number, the purpose of the examination, the periods under review and every deadline given. Preserve your records as they are. Then start reconciling payroll to your T4 return and remittances, and GST/HST returns to your ledger, so you know what the officer will find before they do. If the numbers do not reconcile, get help at that point rather than after you submit.
Tell us what the letter says. We will tell you what it covers.
Payroll, GST/HST, or both. We will identify the accounts and periods, confirm the deadlines, and set out what has to be reconciled before you respond.
