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!
1 - What is a payroll remittance?
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.
How do I calculate payroll deductions?
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;
- Clear your cache at the end of your session. The PDOC will retain your information for up to thirty minutes after you are done using it. Therefore it is important to clear your internet browser cache and close the browser after you are done with your calculations.
- Create your statements of earnings. While the calculator could give you reliable calculations, its output should not be taken as an official statement of earnings to be filed with CRA. There is information that is required on your official statement of earnings that the PDOC does not include. Use the employment standards in your province to help you create completed statements of earnings.
2 - How often should you remit payroll deductions?
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.
3 - What do I need pay a CRA payroll remittance?
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;
- your payroll program (RP) account number (go to How to open a payroll program account, if you don't have one)
- which paydays you are remitting for
- your remitting period end date
- your gross payroll in the remitting period
- the number of employees you paid on your last payday in the remitting period
- your remitter type and remitting frequency
- your remittance due date
- your remittance voucher
Once you have everything on this list, you are now good to go. Let’s walk you through how to pay your payroll remittance.
4 - How do I pay my CRA 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;
- from the 1st through the 7th day of the month
- from the 8th through the 14th day of the month
- from the 15th through the 21st day of the month
- from the 22nd through the last day of the month
Working days don't include Saturdays, Sundays, and any CRA-recognized public holidays.
Remitting by mail
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;
- your payroll program (RP) account number
- that you are a new remitter, if applicable
- your business’ complete legal name, address, and telephone number
- the remitting period your remittance covers (if your remittance covers more than one period, provide a detailed breakdown)
- that you did not receive a remittance voucher, if applicable
5 - When do I pay my CRA payroll remittance?
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;
- remitting periods when you pay or give remuneration
- reporting a nil remittance when you have seasonal workers or no employees
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.
6 - What are the types of payroll remittances?
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.
What are source deductions?
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.
Common types of source deductions
The source deductions you have to withhold and remit to the CRA include:
- Income Tax: You need to use the provincial tables to find the amount deductible from each province under income tax. There is an easy way to calculate the income tax, and that is by using CRA’s online payroll deductions calculator.
- Canadian Pension Plan: Employers must deduct CPP if an employee is between 18 and 69, has a pensionable job with no disability. Visit CRA's Canada Pension Plan page to find more information on contribution rates, exemptions, and other useful information.
- Employment Insurance Premiums: Insurance premiums are deducted from each dollar of insurable pay that your employees earn. To determine the EI deductions for a given year, you should refer to the CRA's EI premium rates and maximums chart.
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.
7 - Is there a penalty if my payroll remittance is late?
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;
- If you deduct amounts over $500 but do not send them to CRA
- If you deduct amounts over $500 but send them to CRA late
- you deduct amounts under $500, and knowingly or under circumstances of gross negligence do not send them to CRA or send them late
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;
- 3% if the amount is one to three days late
- 5% if it is four or five days late
- 7% if it is six or seven days late
- 10% if it is more than seven days late or if no amount is remitted
- 20% if this is the second or subsequent time you are assessed this penalty in a calendar year if the failures were made knowingly or under circumstances of gross negligence
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;
- Inaccurate calculation or deduction
- Late filing information return
- Wrong method of filing information return
- Wrong method of payment (remittance)
Where do I start?
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.