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CRA Payroll Obligations

Obligations

If your company has employees, you are required to register for a payroll account before the first remittance due date. Find out how to open a payroll program account here.

Employers are required to pay employees and calculate withholdings based on federal and provincial labour standards as well as agreements with their employees.

Employers are legally required to withhold tax, CPP, and EI (where applicable) from employees’ pay cheques and remit those amounts to the government on a timely basis to avoid serious penalties (some of the highest penalties in our tax system).

Employers are legally required to provide T4 slips to their employees and to the CRA annually. The total amount withheld on all the T4 slips that an employer provides should match the amounts sitting in the business’s payroll account or else a Pensionable and Insurable Earnings Review (PIER) will take place to identify the variances. PIER reviews can be quite onerous. There are many payroll solutions available to help employers manage the calculation and payment of payroll as well as government remittances.

Withholdings

Calculation

The calculation of withholdings and remittances is very challenging for most business owners, which is why we use software to perform these calculations. If you want to review the specifics of these calculations, read methods of calculating deductions.

Remittances

The CRA has a number of methods of remitting source deductions.

Deadlines

Source deductions are generally due to be received by the CRA on the fifteenth day of the month following the payment to the employees.

Employers must file a T4 Summary and T4 slips with the CRA and provide their employees with their T4 slips (summarizing the employee’s entire year’s income) by February 28 of the year following the payments.

Penalties

If you fail to deduct the correct amount of withholdings, you may be subject to a 10 per cent failure to withhold penalty, which is calculated as 10 per cent of the amount not withheld.

If you fail to remit the correct amount of withholdings, or you remit them late, you may be subject to a 3-10 per cent failure to remit penalty depending on the number of days the payment is late.

Interest

Daily compound interest will be charged on any balance unpaid on the day after the due date. Interest will also be charged on any penalties assessed. See prescribed interest rates.

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