A Barrie Dental Practice's Wage Subsidy Bill, Cut by Documentation

The situation

Nikhil owned a dental practice in Barrie, run through a professional corporation with roughly a dozen staff. His spouse Anita worked as a surgeon and had no ownership stake in the practice, though the couple co-owned a rental property they had bought a few years earlier as a second income stream, held personally in both their names. When the province suspended elective and non-emergency dental procedures for a stretch in 2020, the practice's revenue collapsed almost overnight — hygienists and front-desk staff kept on payroll with almost no incoming billings to pay them from.

Like thousands of other Ontario businesses, the practice applied for the Canada Emergency Wage Subsidy, a federal program that reimbursed employers a portion of wages paid during periods when revenue had dropped compared to a reference period. The practice applied across nine separate claim periods between 2020 and 2021 as restrictions eased, tightened, and eased again. The subsidy kept the staff employed and the practice solvent through the worst of it. Nikhil assumed that was the end of it — until a letter arrived from the Canada Revenue Agency in late 2023 announcing a post-payment audit of all nine periods.

What the audit found

The wage subsidy program was largely self-assessed at the time money went out, with the government auditing claims afterward rather than verifying every application up front. That meant the real scrutiny — and the real risk — landed years later, once memories had faded and some of the original records were harder to reconstruct.

The CRA's initial position was blunt: it proposed disallowing the subsidy for all nine periods and demanded repayment of roughly $780,000, the full amount the practice had received. Two problems drove the number that high. First, the auditor's revenue-decline calculation — the test comparing the practice's revenue in a claim period against its revenue in an earlier reference period — had folded in income from the rental property the couple held personally. That property was never part of the professional corporation; its rent had nothing to do with the practice's finances. Including it made the practice's apparent revenue look higher than it actually was in the reference periods, which understated the real decline and, on paper, knocked several periods below the threshold needed to qualify.

Second, for two of the nine periods, the practice's payroll records were genuinely thin. The office had switched payroll software partway through 2020, and the export from the old system didn't cleanly show hours and gross pay for every employee for those weeks. One of those employees was Amalia, a hygienist on the practice's staff who had been on a parental leave for part of that stretch and was receiving Employment Insurance benefits rather than a wage from the practice. Whether and how her position factored into the eligible remuneration used to calculate the subsidy for those two periods was exactly the kind of question that needed a clean payroll trail to answer — and for those two periods, that trail had gaps.

What we did

1. Mapped the nine periods separately. A reassessment that treats one bad period as proof the whole claim was wrong is common but avoidable. Our team broke the file into nine independent questions, each needing its own evidence, rather than responding to the CRA's letter as one undifferentiated $780,000 problem.
2. Corrected the revenue-decline calculation. We pulled the corporation's own financial statements and bank records to show that the rental property's income had never flowed through the practice's books, and set out the revenue-decline math the way the program's rules actually required it — using only the corporation's own eligible revenue in both the claim period and the reference period. That correction alone restored the practice's eligibility for most of the periods in dispute.
3. Rebuilt the payroll trail for the two thin periods. For the periods affected by the software switch, we assembled bank deposit records, the old system's raw export files, T4 slips filed for that year, and a written timeline of the payroll transition to reconstruct, employee by employee, who was paid what and when — including confirming exactly when Amalia's leave began and ended.
4. Filed a formal objection. Rather than accept the CRA's proposed reassessment, we filed a Notice of Objection setting out the corrected revenue calculation and the reconstructed payroll evidence, period by period, with the underlying documents attached so the reviewing officer could check the math directly.
5. Advised on what to concede. Not every gap could be closed. For the two thin periods, the reconstructed records still could not fully substantiate the eligible remuneration claimed for a handful of positions, including Amalia's during part of her leave. We told Nikhil directly that pushing those two periods further was unlikely to succeed and would only add delay and interest — better to concede those and focus resources on the seven periods with a strong factual basis.

The outcome

The objection process took the better part of a year. On review, the CRA accepted the corrected revenue-decline calculation and reversed its position for seven of the nine periods, restoring eligibility for roughly $645,000 of the original $780,000 in subsidies received. For the remaining two periods, the CRA maintained its position that the payroll records did not fully support the remuneration claimed, and the practice repaid the balance of roughly $135,000, plus arrears interest that had accrued since the original reassessment.

That repayment was a real cost, and Nikhil felt it — the two thin periods represented a genuine gap in the practice's own records, not an error on the CRA's part, and no amount of advocacy could manufacture documentation that had never existed. But the alternative, had the revenue-decline error gone unchallenged, was repaying nearly six times as much. Catching that single calculation mistake was the difference between a manageable adjustment and a bill that would have forced the practice to borrow heavily or lay off staff to cover it.

Anita's surgical income and the couple's other savings meant the family could absorb the $135,000 without a forced sale of the rental property, though it delayed a renovation they had been planning. Nikhil also used the experience to overhaul how the practice keeps payroll and revenue records going forward, with a clear written policy for any future payroll system change: nothing gets migrated until the old system's export has been checked, period by period, against bank deposits. He also asked the practice's bookkeeper to flag any month where personal and corporate transactions might touch the same statement, so a future reviewer never has reason to ask the same question the CRA's auditor asked about the rental property. Amalia, still on staff and back from leave well before the audit began, was surprised to learn her file had been part of a six-figure dispute at all — from where she sat, it had simply been a stretch of maternity leave like any other.

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