The CRA requires all employers in Canada to file payroll taxes correctly and on time. There are several different types of payroll deductions that need to be made, and various different payroll remittance schedules that need to be followed. Ready for your crash course?
Disclaimer: This information applies solely to Canadian business.
The CRA defines an employer as someone that pays salaries and provides benefits to employees. If you fit this definition, then the CRA requires that you calculate, deduct, and remit source deductions every time you issue payroll.
These source deductions are based on employee income, which includes:
As an employer, you must also deduct your share of:
The CRA created a payroll deduction calculator called the Payroll Deductions Online Calculator (PDOC) to manually calculate your tax deductions, but this can be overwhelming and time consuming.
If you’re on the hunt for something easier, we’re here to help. Knit was designed to help people like you. Our AI-powered payroll software will calculate all these deductions for you automatically, hassle-free.
Remittance schedules for payroll deductions are determined by the average monthly withholding amount (AMWA) of your business. This is the sum of every payroll deduction that you paid to the CRA within the calendar year, which is then averaged on a monthly basis.
The CRA uses a 2 year history of your AMWA to classify your business as either new, regular, accelerated, or quarterly remitter.
New employer, or someone who has never made remittance payments. Payments are due on the 15th day of the month following the one in which the deductions were made.
New employers with less than 2 years of AMWA history, or with a 2 year history of $25,000 or less. Payments are due on the 15th day of the month following the one in which the deductions were made.
Employers with 2 years of AMWA history between $25,000 and $99,999.99. Payments are due on the 25th day of the same month for payroll processed during the first 15 days of the month. Deductions for payroll processed after the 16th day is due by the 10th day of the next month.
Employers with 2 years of AMWA history greater than $100,000. Payments are due by the 3rd working day (not weekends, public holidays, or bank holidays) following the 1st-7th, 8th-14th, 15th-21st and 22nd-last day of the month. In simpler terms, no later than the 3rd business day following the week during which the payroll was processed.
Small businesses with an AMWA of less than $3,000 in the previous 2 years, or with a perfect compliance history with the CRA. Payments are due by April 15th, July 15th, October 15, and January 15th for payroll processed in the previous quarter. Quarterly status is reviewed annually.
In order to remit your payments, you must fill out these forms:
If you’re an employer in Quebec, things work a little differently. Quebec uses the Quebec Pension Plan (QPP), provincial income tax, and the Quebec Parental Insurance Plan/Provincial Parental Insurance Plan (QPIP/PPIP).
These payments must be deducted and remitted to Revenu Québec. On top of this, EI and federal tax deductions still have to go to the CRA.
Making source deduction payments on time is crucial if you want to avoid fines, so make sure you don’t forget. Your payroll source deductions must also be held in trust in a separate account from your normal operating account.
The penalties for late payments go as follows:
Here are 2 great options to ensure you make your payments on time:
1. Set reminders on your phone, in your calendars, or with the CRA Reminder App
2. Use an automated payroll management solution like Knit to take care of it for you!