Payroll Source Deductions and Remittance Deadlines in Canada

What goes into a payroll remittance

An employer withholds applicable income tax, Canada Pension Plan contributions, and Employment Insurance premiums from employee remuneration. The employer also contributes its share of CPP and EI. These amounts form the payroll source deduction remittance sent to the CRA for the correct payroll program account and remitting period. Quebec payroll has separate QPP, QPIP, and provincial source deduction requirements and is outside this Alberta focused overview.

The calculation starts with the facts of each payment: regular wages, hours, bonuses, commissions, taxable benefits, pensionable and insurable treatment, province of employment, TD1 information, and year to date maximums. Use current CRA calculation tools or maintained payroll software. A correct deduction calculated from outdated tables can still be wrong.

CRA remitter types and standard due dates

The CRA generally determines remitter type using the average monthly withholding amount from two calendar years ago and reviews payroll accounts each year. Perfect compliance is an additional condition for quarterly treatment. Employers should use the type shown in My Business Account or Represent a Client rather than choosing the frequency that seems to match current payroll.

Payday, nil periods, and business changes

Remittance timing follows the date employees are paid, not the dates the work was performed. If a January pay period is paid in February, the February payday determines the remitting period. This is an important cut off for month end payroll reconciliations and prevents a business from assigning a payment to the wrong CRA period.

A business with no employees paid during a required remitting period may still need to report a nil remittance by its normal due date and indicate when deductions are expected to resume. When a business stops operating, changes legal status, restructures, amalgamates, enters bankruptcy or receivership, or a sole proprietor or partner dies, CRA's current rules can require a final remittance within seven calendar days. Obtain advice before changing or closing an account because the related T4 and record obligations continue.

• Confirm the assigned remitter type in the CRA account.
• Tie every pay date to the correct remitting period and due date.
• Schedule payment early enough for the chosen financial channel to deliver it.
• Retain the payroll register, deduction calculation, approval, payment proof, and CRA confirmation.
• Report nil or final periods using the CRA process that applies to the business.

What happens when a remittance is late

CRA's current employer guide describes graduated late remittance penalties of 3% when one to three days late, 5% when four or five days late, 7% when six or seven days late, and 10% when more than seven days late or no amount is remitted. Interest can also apply, and repeated failures involving gross negligence can have more serious consequences. If an error is found, calculate the shortage and address it promptly rather than waiting for the next annual filing.

• Director liability for unremitted deductions