Why Are Payroll Taxes Important?

Your employees are your most valuable asset. They need to be paid on time and their payroll taxes need to be remitted to the CRA on time in order to avoid hefty penalties and interest. So read on to learn how to avoid any of that kind of drama. Canadian employers have to pay their employees their net pay via cheque or direct bank deposit, and submit payroll remittances to the Canadian Revenue Authority (CRA) based on the determined remittance schedule. You may be required to remit quarterly, monthly, twice monthly, or weekly.

CRA informs you each year in November if your company remitting cadence will change at the close of your business year. So, depending on your form of remittance, you are required to provide these details on the PD7A form.

  • Payroll number
  • Number of employees
  • Canada Pension Plans (CPP) Contributions
  • Employer Insurance (EI) premiums
  • Tax deductions
  • Gross payroll amount

You can find out your remittance type through your CRA account under the “View Remitting Requirements.”

Steps to Follow When Submitting Remittances to the CRA

This article breaks down the steps to follow when submitting remittances to the CRA. In summary, these are the procedures for remitting payroll deductions.

  1. Open a CRA payroll account
  2. Collect employees’ information, including the Social Insurance Number (SIN) and a completed provincial and federal TD1 form.
  3. Make payroll deductions on the employees’ salary and wages every pay period.
  4. Remit to the CRA the tax deductions, CPP contributions, and Employment Insurance Premiums.
  5. Report each of your employee’s income and tax remittance on a T4 or T4A slip and fill the information return before the last day of February of the following year.

Setting up a CRA Payroll Program Account

First, you should set up a payroll program account with the Canadian Revenue Authority (CRA). Before your first remittance due date, you should register for the payroll program account. The fastest way to open your payroll program account with CRA is to call them.

Collect Employees’ Information

This information determines the remittances, deductibles, and even subsidies that you may be eligible to receive. The Social Insurance Number identifies Canadian citizens or permanent residents authorized by Citizenship Canada or Immigration to work for a particular period.

Your employees should fill out the provincial and federal Form TD1 that determines the deductible tax on their employment income.

Appropriate Payroll Deductions

After that, look at additional benefits such as a company car, some health benefits, lodging, or parking that may be taxable. These employee benefits will thus be subject to income tax deductions, EI premiums, and CPP contributions.

Remit Deductions

It is recommended that you remit your tax deductions electronically. You can do this through the mybusiness account or via your financial institution.

Submit T4s to the CRA

Finally, you can fill out an online PDF of the CRA’s T4 web forms and submit it by the end of February each year.

3rd Party Payroll Programs

If all the above sounds a bit cumbersome, we have great news! You can subscribe to 3rd party payroll platforms that automate the payroll calculation, payment, and remittance process! In addition, automating your source deductions will help you to avoid penalties and interest from late filings.

CRA Penalties

While we are on the subject, let’s chat about penalties – everyone’s favorite topic! Because failure to pay your employee remittances on time can have significant consequences on your business. In other words, by withholding deductions without submitting to CRA, you may incur up to a 10-20% penalty on the amount you owe.

In conclusion, you still need to file if you don’t have taxes to remit. Moreover, if your company does not have employees for a certain period, you can file NIL remittances on time to avoid penalties.

Getting Help with Filing Payroll and Remitting Taxes

Need help with submitting remittances to the CRA? Interested in getting some help with implementing a payroll application? Check out our payroll services or talk to one of our accountants in Vancouver.

Helina Patience, CPA, CMA
Author: Frazer Chen, Tax Specialist, CPA, Accounting Diploma

Our professionally fluent Mandarin and English speaking CPA tax specialist who is conscientious, detail-oriented, and meticulous. Frazer has also held positions as Senior Accountant @ J. Le-Tang Ltd., Staff Accountant @ Helenah Wu & Co. Inc. and Financial Analyst @ The People’s Bank of China. Connect on LinkedIn.

Get access to our hottest business-scaling tips, tools and resources.

  • This field is for validation purposes and should be left unchanged.

Gain access to HR, Finance/Accounting and Systems secrets from a team that has helped hundreds of companies grow up.