CRA Payroll form PD7A / How to avoid a payroll audit

If you are incorporated or have a payroll number you will have seen this form.  It is an annoying reminder from the CRA that they want you to submit payroll remittances (they want your money) for employee source deductions (CPP, EI, Income Tax).  If you don’t have actual employees this form will both scare and annoy you at the same time. 

 

If you don’t want this form to be sent to you, then you will need to fill out the form indicating that the business has ceased to have employees, and mail it back to the CRA.    I just met with a CRA auditor and queried her as to why one of my clients was being audited for payroll.  The answer I got is that they did not send in the PD7A form that was sent to them, and as a result the CRA is concerned that they might be using payroll remittance funds for operating capital.  She also went on to tell me that   “If you do not send this form back to the CRA then they will schedule an audit.”

 

If you actually have employees do your remittances on time and file your paperwork on time, unless you want to go through an audit.  The penalties for being late are brutal, and the penalties for non-compliance are worse.  The penalties are so bad that they can cripple your business for years, or cause outright bankruptcy.  Payroll should be your top priority over any other expense.  It’s not even your money, so it should not be a big problem to send it in to the CRA.

 

Another noteworthy point is that payroll like GST carries directors’ liability.  This means that if the corporation has no money or closes the CRA can go after the corporate director (which in most cases is the primary shareholder) and force them to pay the debt.  This places your life savings, retirement, and personal residence at risk. 

 

The fastest ways to get an audit is to ignore CRA correspondence, file information and tax returns late, and generally be non-compliant with tax law.  If you DON’T want an audit complete and file your paper work on time and make sure your required payments are up to date.

 

If you are afraid or too busy get help by calling us now.  We understand that you have a business to run, but if you are too busy to deal with your “tax affairs” you may find yourself bankrupt and out of business.  MAKE TIME TO DEAL WITH YOUR TAXES!!