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CRA Employer Payroll Remittance & Deductions

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When a business has employees, the law requires the employer to withhold and remit to the Canada Revenue Agency (“CRA”) certain amounts from gross pay. At first, you have to register for a payroll program account with the CRA. You have to register if you pay salaries or wages, pay tips or gratuities, pay bonuses or vacation pay, or provide benefits or allowances to employees.

The employer is responsible for properly classifying employees as separate from independent contractors, and withholding the right amounts. Businesses often try to call persons who would be employees under the heading of independent contractor to save money. The classification is a matter of law and a question of fact. Often this attempt to save on payroll remittance taxes comes back to haunt employers, sometimes forcing them into bankruptcy. The classification of employer and employee can be tricky, but a tax professional will be able to help you make the right decision.

Employers must make deductions from employee pay. Most employees (there are a few exceptions for some deductions) have Canada Pension Plan (CPP) contributions, Employment Insurance (EI) premiums, and income tax deducted, withheld, and remitted.) These amounts can be calculated using the CRA’s online payroll remittance deductions calculator. Note that there are other payroll taxes that may apply, such as worker’s compensation premiums, but these are not part of the amount deducted and remitted to the CRA. An employee can ask you to withhold less income tax, because of their personal circumstances, by filling out Form TD1 “Personal Tax Credits Return”. This allows them to have access to more of their pay during the year rather than have to wait for a refund after the end of the year.

Depending on the number of employees you have and, therefore the amount you remit monthly, you can be either a new small employer remitter, a regular remitter, or one of two categories of accelerated remitters. A regular remitter is a new employer that has monthly average monthly remittance amounts of more than $1,000 and less than $25,000, or a remitter that has been remitting for more than 12 months has had an average monthly remittance of $3,000 or more. As a regular remitter, you have to remit the amounts to the cra online payroll on the 15th day of the month after you pay or give employees their remuneration.

The amounts that are required to be withheld are considered to be held in trust for the government and can be collected by the cra payroll deductions immediately. The failure to withhold and remit payroll taxes is a common reason a business may get in trouble with the tax man. In a corporation, directors can be personally liable for the failure of the corporation to withhold and remit required amounts. Always seek out a tax professional so you know what your payroll obligations are.

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Testimonial

Sam Faris reduced the significant unreported income based on net worth audit to be nil. Sam’s approach in fighting these types of complex audits is unique and sophisticated. He found countless mistakes made by the auditor which were rectified when Sam appealed the audit decision. Instead of owing significant amount of taxes, Sam reduced it to zero. I highly recommend to hire Sam for this type of audits and any CRA problem.”

E.M., Ottawa