Start by reviewing your company’s payroll records thoroughly, ensuring all employee hours, wages, and deductions are accurately documented and compliant with federal and provincial regulations. This foundational step helps identify discrepancies before auditors do, reducing potential penalties and corrections during the review.
Next, organize all supporting documentation, including tax filings, benefit distributions, and remittance reports. Having these records easily accessible facilitates smooth verification processes and demonstrates transparency. Confirm that all forms, such as T4 slips and payroll summaries, are completed correctly and submitted on time.
Perform a comprehensive internal audit to detect inconsistencies or inaccuracies in your payroll calculations, tax deductions, and benefits administration. Address any identified issues immediately by updating records or correcting submission errors. Regular audits can streamline the process and build confidence in your payroll system’s accuracy.
Update your payroll policies and procedures to align with the latest changes in Canadian tax laws and employment standards. Document these policies clearly and ensure your team is trained on them, fostering consistency and reducing the risk of non-compliance during an audit.
Finally, establish a dedicated point of contact within your organization for audit-related inquiries. This person should be familiar with payroll processes and ready to communicate with auditors efficiently. Staying proactive and prepared minimizes disruptions and demonstrates your commitment to compliance during the review process.
Verify compliance with Canadian payroll tax regulations and reporting deadlines
Review the latest updates from the Canada Revenue Agency (CRA) to ensure your payroll processes align with current tax rates, contribution requirements, and filing procedures. Confirm that senior staff members are aware of recent legislative changes to prevent missed obligations.
Check that deductions and contributions are accurately calculated and remitted
Cross-verify payroll records against official tax tables to ensure accurate withholding of federal and provincial income taxes, Employment Insurance (EI), Canada Pension Plan (CPP) contributions, and other applicable levies. Ensure that amounts are remitted on or before CRA deadlines–generally, payroll remittances are due by the 15th of the month following the payroll period. Use automated payroll software or spreadsheets with built-in tax calculation features to minimize errors.
Maintain a detailed schedule of all upcoming reporting deadlines, including annual T4 slips, summaries, and other filings. Set reminders well in advance to gather necessary documentation and review submission requirements for each reporting period.
Validate compliance through regular internal audits
Conduct periodic reviews of payroll records, remittance transactions, and reporting submissions to identify discrepancies. Compare your filings with CRA records using the online My Business account or other official portals. Document any deviations and implement corrective measures promptly to stay aligned with regulatory expectations.
Stay informed about changes to thresholds, caps, and contribution rates that could impact your payroll calculations. Consistent adherence to deadlines and precise reporting safeguards against penalties and audits from tax authorities.
Gather and organize payroll records, employment agreements, and tax filings for review
Collect all payroll records from the audit period, including detailed pay stubs, detailed time sheets, and payment histories. Ensure each record is complete and matches the corresponding entries in payroll summaries. Digitize paper documents and create a clear, logical folder structure to facilitate quick access during review.
Compile employment agreements for all personnel, verifying that each document reflects current terms, including salary, pay schedule, deductions, and benefits. Cross-reference employment terms with payroll data to confirm consistency and identify discrepancies. Keep these agreements in a dedicated folder sorted by employee or department.
Gather all relevant tax filings, such as T4 slips, summaries, and remittance reports submitted to Canada Revenue Agency (CRA). Check that filings cover the entire review period and match internal payroll totals. Organize these documents chronologically and label them clearly for easy reference during the audit process.
Audit payroll changes and adjustments by reviewing records of bonuses, additional payments, or corrections. Ensure documentation exists for each modification, including approval emails or forms. Store these records separately but in connection with related payroll documents for a comprehensive view.
Verify that all tax documents and payroll records are aligned with recent financial statements. Spot inconsistencies early and prepare explanations or corrected data if needed. Maintain an inventory list of all organized materials to track completeness and readiness for audit review.
Conduct an internal review to identify and resolve discrepancies before the audit date
Start by extracting payroll data from your record-keeping systems for the review period. Cross-reference payroll registers, payment summaries, and tax filings to flag any mismatches or irregularities. Use specialized spreadsheet filtering or accounting software to spot unexpected variances in employee hours, wages, or deductions.
Review key payroll components thoroughly
Focus on verifying employee classifications, ensuring each worker is correctly categorized regarding full-time, part-time, or contractor status. Confirm that tax records align with the amounts reported to authorities, such as the Canada Revenue Agency (CRA). Examine benefit deductions, pension contributions, and other withholdings, making sure amounts are accurate and consistent across records.
Address discrepancies proactively
Once identified, investigate the root causes of discrepancies–whether data entry errors, misapplied tax codes, or calculation mistakes. Correct inaccuracies promptly, documenting each adjustment. Communicate with employees or relevant departments if adjustments impact payroll summaries or tax filings. Updating records before the audit ensures data accuracy and demonstrates control over payroll processes.
Keep detailed logs of the review process, including steps taken to resolve issues and the date of corrections. This documentation supports transparency during the audit and helps clarify any questions from auditors. Completing this review early reduces last-minute errors and boosts confidence that your payroll records are complete and precise.