Payroll remittance is a complex and tedious process that all business owners and managers have to deal with regularly.
Due to the complexity, it is often easy to misunderstand the process, skip a step, send in your remittance after it is due, as well as many other errors.
These mistakes are not easy to undo without facing penalties and wasting time correcting the mistakes you have made.
Because of the high complexity and severe penalties there is virtually no room for mistaking when processing your payroll remittance and sending it in.
That is why we have prepared a list of seven things you need to know about payroll remittance that should help you navigate the process of remitting your payroll deductions without incurring any penalties. Let's get started!
A payroll remittance is an amount you have to send to the Canadian Revenue Agency (CRA) after paying remunerations or giving a taxable benefit to an employee on your payroll.
Remunerations refer to the various forms of compensation and benefits that you are required by law to offer to your employees. They include salaries, wages, commissions, taxable benefits and pension income.
When you pay remuneration, such as salary or wages, or give a taxable benefit to a recipient, you have to make source deductions from that amount. You then have to remit these deductions to the CRA.
The source deductions, which we will get into in more detail later in the article, include CPP contributions, EI premiums and income tax.
According to CRA, you as an employer have to make these deductions from your employees’ salaries (withhold these deductions) and remit them, along with your share of CPP contributions and EI premiums. That is what constitutes a payroll remittance.
The easiest way to calculate payroll deductions is by using the Payroll Deductions Online Calculator (PDOC).
This calculator will help you confirm that the deductions you are entering on your official statement of earnings. It is important that you enter the right amounts to avoid paying penalties for inaccurate reporting.
It is important that you keep in mind that the payroll deductions calculator is only as good as the quality of information you enter.
So take care to make sure that you enter the information accurately.
Regardless of whether you have outsourced this process, the responsibility of making sure that the calculations are accurate falls squarely on you as the employer.
That being said, there are some things you can do to make sure the PDOC works well for you and to limit the risks of your sensitive payroll data falling into the wrong hands. These include;
Whenever you pay salaries, wages or offer taxable benefits to your employees, you must make source deductions from those amounts, and they must be remitted regularly to CRA.
The frequency of your remittances is based on the remitter type you qualify for. It is important for you to know your remitter type and, therefore, your remitter frequency to know your due dates and remit your payroll deductions on time. This will help you to avoid any penalties that could arise from that.
Your remitter type is determined by your average monthly withholding amount (AMWA) from the two calendar years prior to the current reporting period.
Your AMWA is the total of all the Canada Pension Plan (CPP), employment insurance (EI), and income tax you had to remit for the year, divided by the number of months (maximum 12) that you had to remit for. That mount determines what your remitter type is.
Below is a table that shows the AMWA ranges and the corresponding remitter types for each range.
From the table above, you can see that new remitters can either be classified as quarterly remitters or regular remitters, depending on the employer's size. Small employers will be quarterly, and the new employers that cannot be categorized as 'small' are regular remitters.
Once you have identified your remitter type, you can easily know how often you are required to remit your payroll deductions. We have prepared a table below that summarizes your remittance frequency depending on your specific remitter type.
There are various ways you can pay your CRA payroll remittance. However, before we get to you making the payment, let's go through the checklist of what you need to make a payroll remittance.
In order to make a payroll remittance, you need to have the following information beforehand;
Once you have everything on this list, you are now good to go. Let’s walk you through how to pay your payroll remittance.
Depending on the remitter type you are, you have different options available to you when paying your payroll remittance.
For Quarterly, Regular and Threshold 1 accelerated remitters; you can pay your remittance by mail.
However, the Threshold 2 accelerated remitters cannot send in their payroll remittance payments by mail. You must remit either electronically or at a Canadian financial institution.
Make sure that your payment is made to your Canadian financial institution no later than the third working day at the end of the following periods;
Working days don't include Saturdays, Sundays, and any CRA-recognized public holidays.
As mentioned above, all the other remitter types, with the exception of the Threshold 2 accelerated remitters, are allowed to pay their payroll remittances by mail. If you choose to make your remittance by mail, make your payment payable to the Receiver General. Ensure that your payroll program (RP) account number is printed on it, and mail it to the Sudbury Tax Centre with your remittance voucher. If you pay your remittance earlier than the due date (as you should), you may post-date your payment to your remittance due date.
If you don’t have a remittance voucher, then you must make sure you include the following information along with the payment;
Just like the payroll remittance frequency above, when you make your CRA payroll remittance is determined by your remitter type. The type of remitter you are will determine when your due dates are for you to make your payroll remittances. The remittance due dates apply to both these scenarios;
The CRA must receive your payroll remittance on or before your due date. Below is a table to show you when the due dates are for the different remitter types. Study this table to know when your CRA payroll remittances are due.
Payroll remittances can be broken down into two main categories. These categories include the source deductions and the employer’s contributions to the payroll remittances.
Source deductions refer to the amounts of money you deduct and withhold from your employees when you pay them their salaries, wages or any taxable benefits they get from the company.
For example, if you have an employee earning $1,000, they do not get that entire amount paid to them. They get that minus whatever they are obligated to pay or contribute to depending on the federal and provincial regulations.
The source deductions you have to withhold and remit to the CRA include:
Other than the source deductions, the other type of remittance is the employer's contribution to the employees' deductions and remittances.
For example, as the employer, you must contribute 1.4 times the value being withheld from the employees for the Canadian Pension Plan (CPP). These contributions make up the other part of the payroll remittances.
The short answer to this question is YES. There are heavy penalties to be incurred if your payroll remittance is late. For this reason, you must put a system in place to ensure that your payroll remittances are processed and submitted on time.
When can penalties be assessed?
Penalties can be assessed when you do one of the following;
The penalty for sending your payroll remittance late varies based on how long you are late. Below is the breakdown of the penalties depending on how late you are;
If your Due Date falls on a weekend or a public holiday recognized by CRA, it will not be considered late if received on the next workday after the weekend or public holiday.
Please also note that sending your payroll remittances late is not the only thing you can get penalized for by CRA. You will also get penalized for one of the following;
As you can see, this process is complex, and the penalties for any mistakes or oversights are high. So that's why we recommend investing in an intuitive and integrated payroll software system to help them navigate the payroll remittance process with minimal difficulty.
Using integrated and automated software will you save time with smart automations, calculations and data transfer.
This smart software can automatically calculate payroll deductions on every employees' pay check, as well as remitting these deductions to the government, even before you knew they were due.
If you have more questions about payroll remittance, let's connect.
“In the labor numbers, we were reporting about a $300 to $400 difference than what we were getting through Push!”
-Tara Hardie, ZZA Hospitality Group, 16 locations