Payroll Obligations to CRA
As your business starts to grow you may need additional help around the office or the shop. Hiring an employee comes with obligations to the government that surprises many small business owners. This post will address these obligations, and help you better understand what having an employee means for your business. As a disclaimer, this only covers the general Canadian obligations and rules in Alberta, you will need to check if your province has specific rules for payroll taxes.
CRA Deductions
When you get an employee the CRA requires that you take deductions off their paycheques and remit it based on your assigned schedule. This is a major consideration of having employees, and can come with the heftiest fines if you ignore it. The CRA will levy 10 to 20% penalties if you are even a couple days late with your remittances. The reason the CRA is this strict with payroll deductions is because it is not considered the companies money, you are simply holding it in trust for the government.
There are three taxes that you generally must take off an employees paycheque, Canada Pension Plan (CPP), Employment Insurance (EI), and Income Taxes. The employer must contribute to both CPP & EI and remit both the employee and employer portions of all taxes to the CRA. While CPP is 1:1, the employer must remit 1.4 times the EI. There are ways to reduce this liability with providing a short-term disability plan for employees that meets the CRAs criteria. You can find information about that here.
To determine that you are taking the correct amount of income taxes off your employees paycheque, you need them to fill out both a federal and provincial TD1. Once you have filled out this form, you must follow their claims code when providing payroll services. Both the federal and Alberta 2019 TD1s are linked to below for your reference.
Federal TD1
Alberta TD1
Do these three taxes always apply to payroll items?
Payroll is not always simple and straightforward. There are many items that an employee can be paid for that are not just their wages. All of these different payroll items have different rules in regards to taxes. This can get extremely complicated and you have to take extreme care when preparing your employees payroll.
CRA has a helpful chart on what taxes apply to each situation, you can find that chart here.
CRA also provides a payroll calculator that can help your business, you can find it here.
Remittance Schedules
Based on the amount of your payroll, the CRA has different schedules for when you must make your payroll remittances. The more payroll you have, the more frequently you need to remit to the government. Below are two charts showing the different frequency levels and when those levels need to remit. Both charts are taken from the CRA website, here.
Remitter Type
| Remitter type | Average monthly withholding amount (AMWA) |
| Quarterly remitters: new small employers | Not based on AMWA. The monthly withholding amount is zero to $999.99 and you have a perfect compliance history. |
| Quarterly remitters: account opened for 12 months or longer | From zero to $2,999.99, and you have a perfect compliance history. |
| Regular remitters | From zero to $24,999.99 |
| Threshold 1 accelerated remitters | From $25,000.00 to $99,999.99 |
| Threshold 2 accelerated remitters | $100,000.00 or more |
Remitting Frequency
| Remitter type | Remitting frequency | Remitting period | Remittance due dates |
| Quarterly | Quarterly | January 1 to March 31
April 1 to June 30 July 1 to September 30 October 1 to December 31 |
April 15
July 15 October 15 January 15 |
| Regular | Monthly | Calendar months | 15th day of the next month |
| Threshold 1 accelerated | Up to twice a month | 1st to 15th of the month
16th to end of the month |
25th day of same month
10th day of the next month |
| Threshold 2 accelerated | Up to four times a month | 1st to 7th of the month
8th to 14th of the month 15th to 21st of the month 22nd to the last day of the month |
3rd working day after the 7th
3rd working day after the 14th 3rd working day after the 21st 3rd working day after the last day of the month |
Even if you fall in the Quarterly remitter section, you can choose to still be a regular remitter. As noted earlier, you need to make sure you are able to make these remittances on time to avoid the penalties. Therefore, choosing to be a regular remitter might help you stay compliant.
How do I pay these remittances?
There are multiple ways that you can pay your payroll remittance to the CRA. The CRA has compiled a complete listing here. Below are the most popular ways we, as a company, have seen employees use.
- Online Banking, you can talk to your bank about the services they provide
- My Payment, allows you to pay with credit card or debit online
- At the bank
- Mailing in a cheque
