Once you pay an employee, you become responsible for withholding tax and other deductions and sending them to the CRA on time. Getting this wrong is expensive, because the CRA charges penalties and interest on late or missing remittances.
What you deduct and remit
Each pay period you generally deduct from the employee's pay:
- Income tax based on their TD1 claim forms and pay level
- CPP contributions (see our CPP guide)
- EI premiums
You then add the employer share of CPP and EI and send the total to the CRA. Together these are called source deductions.
When remittances are due
Your remittance frequency depends mainly on the size of your average monthly withholding amount. Most small employers are regular remitters, whose payments are generally due by the 15th of the month after the pay period. Larger employers remit more often, and very small employers may qualify for quarterly remitting. The CRA assigns your frequency, so check your account.
If the due date falls on a weekend or holiday, the deadline moves to the next business day.
Year-end reporting
- T4 slips and the T4 summary are due by the last day of February for the previous calendar year.
- Employees need their T4 to file their personal returns.
- If you make payments to contractors, other slips such as the T4A may apply.
Penalties
Late remittances can bring a penalty that starts at 3% to 10% of the amount, depending on how late it is, plus daily compounding interest. Repeated failures and deliberate under-remitting can draw higher penalties. Directors can also be personally liable for unremitted source deductions.
Do you have to pay yourself through payroll?
If you own your corporation and take a salary, the same rules apply. Some owners take only dividends to avoid payroll admin, which comes with its own trade-offs. See salary versus dividends.
Keeping it under control
- Register a payroll account with the CRA before the first payday.
- Collect a signed TD1 and confirm each employee's SIN.
- Use payroll software or a service that calculates deductions correctly.
- Pay the CRA through your bank's online bill payment or CRA My Business Account.
- Keep payroll records for six years. See what the CRA requires you to keep.
Our payroll service handles calculations, remittances and T4s so nothing slips.
This article is general information, not tax advice. Confirm your remittance schedule and current penalty rates on the CRA website.
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