CRA and WSIB Audits: What Brampton Businesses Need to Know to Stay Compliant

Worried about a CRA or WSIB audit? If you run a business in Brampton, you need to understand how these audits work and what steps to take to stay compliant. Failing to meet tax and workplace safety regulations can lead to penalties, interest charges, and legal consequences.

In this guide, we’ll explain what CRA and WSIB audits are, why they happen, and how you can prepare to protect your business from financial and legal risks.

What is a CRA Audit?

A CRA audit is a review of your business’s financial records to ensure that you have reported your income and expenses correctly. The Canada Revenue Agency (CRA) conducts audits to verify tax filings and ensure businesses comply with tax laws.

Why Does the CRA Audit Businesses in Brampton?

The CRA selects businesses for audits based on several factors, including:

• Unusual financial activity – Large deductions, inconsistent income, or sudden changes in expenses.
• Frequent late tax filings – Late or incorrect filings raise red flags.
• Random selection – Some businesses are chosen at random for review.
• Industry-specific risks—Audits are more likely to occur in Certain industries, such as construction, restaurants, and self-employment.
• Discrepancies in reporting——Mismatches between tax filings and third-party data (e.g., banks, suppliers) can trigger an audit.

What is a WSIB Audit?

The Workplace Safety and Insurance Board conducts a WSIB audit to ensure that businesses are correctly registered, paying the right premiums, and following workplace safety regulations.

Why Does WSIB Audit Brampton Businesses?

The WSIB audits businesses to:

• Verify if employers are correctly classifying employees.
• Ensure correct payroll reporting for premium calculations.
• Check if companies have the required WSIB coverage.
• Investigate workplace safety concerns and claims.

Common Reasons Brampton Businesses Get Audited

Both CRA and WSIB audits can happen for various reasons, including:

1. Inconsistent Tax Filings

• Discrepancies in tax returns, payroll records, or HST/GST filings can trigger a CRA audit.
• WSIB may audit if reported payroll doesn’t match business size or industry norms.

2. Misclassifying Employees as Contractors

• Businesses sometimes classify workers as independent contractors instead of employees to avoid payroll taxes and WSIB premiums.
• Misclassification can lead to heavy penalties from both CRA and WSIB.

3. High Business Expenses or Unusual Deductions

• Claiming excessive business expenses, especially those unrelated to business operations, may trigger a CRA audit.
• The CRA examines deductions like home office expenses, vehicle use, and meals to ensure they are legitimate.

4. Late or Incorrect WSIB Premium Payments

• Businesses that frequently pay WSIB premiums late or inaccurately report payroll can be audited.
• Incorrect premium classification may lead to back payments and fines.

5. Workplace Injury Claims

• If an employee files a workplace injury claim, WSIB may audit the company to verify compliance with safety regulations and insurance coverage.

How to Prepare for a CRA or WSIB Audit

1. Keep Accurate Financial Records

• Maintain organized records of all income, expenses, payroll, and tax filings.
• Keep receipts, invoices, and bank statements for at least six years.
• Use accounting software or hire a Brampton accountant to manage records.

2. File Taxes and WSIB Reports on Time

• Submit corporate tax returns, HST/GST filings, and WSIB premium payments by their due dates.
• Avoid late payments and ensure payroll remittances are accurate.

3. Ensure Proper Worker Classification

• Clearly distinguish between employees and independent contractors based on CRA and WSIB guidelines.
• Issue T4 slips for employees and T4A slips for independent contractors.

4. Be Prepared to Justify Deductions

• Only claim legitimate business expenses.
• Keep records of business-related travel, meals, office supplies, and equipment purchases.

5. Comply with Workplace Safety Regulations

• Register for WSIB if required and pay premiums on time.
• Implement workplace safety protocols to prevent injuries and claims.

6. Respond Promptly to Audit Requests

• If you receive an audit notice, respond within the given timeframe.
• Provide requested documents and work with a Brampton tax professional to ensure compliance.

What Happens During a CRA or WSIB Audit?

CRA Audit Process:

1. The CRA sends a notice outlining the scope of the audit.
2. The auditor reviews financial records, tax returns, and supporting documents.
3. If discrepancies are found, adjustments may be made, and penalties may apply.
4. You can appeal the audit results if you disagree.

WSIB Audit Process:

1. WSIB requests payroll records and classification details.
2. The auditor verifies compliance with workplace insurance rules.
3. If underpayments are found, businesses must pay outstanding amounts and potential penalties.

Consequences of Failing a CRA or WSIB Audit

If the CRA or WSIB finds compliance issues, businesses may face:

• Financial penalties – Fines for late filings, misclassified workers, or unpaid taxes.
• Interest charges – Accrued interest on unpaid amounts.
• Legal action – In severe cases, businesses may face legal consequences.
• Increased audit risk – Once audited, businesses are more likely to be reviewed again in the future.

Final Thoughts

CRA and WSIB audits can be stressful, but with proper preparation, Brampton businesses can stay compliant and avoid penalties. Keeping accurate records, filing reports on time, and consulting a tax professional can protect your business from costly errors.

Need help with an audit? Contact Mankoo & Gupta CPA for expert corporate tax and WSIB compliance services in Brampton!