If you are a Canadian employer, it’s important to understand your obligations to the Canada Revenue Agency (CRA) regarding payroll remittance. This involves calculating, withholding, and remitting income tax, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums from your employees’ pay.

In this article, we will discuss everything you need to know about CRA payroll remittance, including the calculation of deductions, payment deadlines, and penalties for non-compliance.

Calculation of Deductions

Employers must calculate payroll deductions based on the employee’s taxable income and their contributions to CPP and EI. The CRA provides a guide to calculating payroll deductions, which includes tables for federal and provincial tax rates, as well as CPP and EI contributions.

It’s important to note that the amount of payroll deductions can vary based on the employee’s situation, such as whether they have additional income from another job or receive certain tax credits. Employers should consult the CRA’s guide and seek advice from a tax professional if necessary.

Payment Deadlines

Employers are required to remit payroll deductions to the CRA on a regular basis. The payment frequency is determined by the average monthly withholding amount (AMWA) of the employer in the previous calendar year.

If the AMWA is less than $15,000, the employer must remit deductions on a quarterly basis. If the AMWA is between $15,000 and $50,000, the employer must remit deductions on a monthly basis. If the AMWA is over $50,000, the employer must remit deductions on a semi-weekly basis.

Penalties for Non-Compliance

Failure to remit payroll deductions on time can result in penalties and interest charges. The CRA assesses a penalty of 3% for the first offense, 5% for the second offense, and 7% for the third and subsequent offenses.

In addition, the CRA charges interest on late remittances at the prescribed rate, which can vary depending on the current market conditions. Employers can avoid penalties and interest charges by ensuring timely remittance of payroll deductions.

Conclusion

CRA payroll remittance can be a complex process, but it’s essential for Canadian employers to fulfill their obligations. Employers must calculate payroll deductions accurately, remit payments on time, and keep accurate records to comply with the CRA’s regulations.

If you have any questions or concerns about CRA payroll remittance, seek advice from a tax professional. By understanding your obligations and staying compliant, you can avoid penalties and ensure your business remains in good standing with the CRA.