Small business payroll remittance to the CRA: not your money either.

The short answer: a payroll remittance is the income tax, CPP contributions and EI premiums you deducted from your employees’ pay, plus your own employer share, sent to the CRA. A regular remitter pays by the 15th of the month after payday. Late remittances draw penalties of 3% to 10%, and the directors of a corporation can be personally liable for what it did not send.

What exactly am I remitting?

According to the CRA’s employers’ guide to payroll deductions, each pay you deduct three things:

• income tax,
• Canada Pension Plan (CPP) contributions,
• Employment Insurance (EI) premiums.

Then you add your own share. For CPP, you match what you deducted. For EI, you pay 1.4 times the employee’s premium. The same guide says you should hold these amounts in trust for the Receiver General, separate from your operating funds. The CRA’s page on deemed trusts says the same thing about payroll deductions as it does about the HST you collect.

When is my payroll remittance due?

It depends on your remitter type. The CRA sets it, generally from your average monthly withholding two calendar years ago. The CRA’s due-date page:

“Perfect compliance” means twelve months with no late remittances and no remitting penalties, among other things. One late payment can cost you quarterly status.

What happens if I remit late?

The CRA’s late-remitting penalties climb fast:

• 1 to 3 days late: 3%.
• 4 or 5 days late: 5%.
• 6 or 7 days late: 7%.
• More than 7 days late, or not remitted: 10%.

These penalties apply when the amount you deducted is over $500. A second failure in the same calendar year can draw 20% if it was made knowingly or with gross negligence. Interest runs from the due date, compounded daily, on the tax and on the penalty.

Can the CRA come after me personally?

If you are a director of a corporation, yes. Under the CRA’s directors’ liability circular, directors can be held jointly and severally liable for unremitted source deductions, with interest and penalties. The CRA has two years after you stop being a director to assess you. The defence is showing you took the care a reasonably prudent person would have taken to prevent the failure. A sole proprietor has no corporation between them and the debt to begin with.

What else does payroll owe at year-end?

• T4 slips: to your employees, and filed with the CRA, by the last day of February.
• Record of Employment (ROE): the form you issue when an employee’s earnings stop, for a layoff, a quit or a leave. Filed electronically, it is due within 5 calendar days after the end of the pay period in which their earnings stop, for weekly, biweekly or semi-monthly pay.
• Workers’ compensation: each province’s board sets its own annual return. With WCB PEI, if you have a worker in PEI, you renew your registration by February 28 each year, reporting last year’s actual payroll and an estimate for this year. Elsewhere in Atlantic Canada the return goes to WCB Nova Scotia, WorkSafeNB or WorkplaceNL, on that board’s own schedule.

From the desk

When I read small-business files on the lending side, unremitted payroll was a line I looked for early. It told me the business was covering a gap with money it was holding for its employees and the CRA. It is also one of the easiest problems to prevent. Remit on payday, not on the due date, and the question never comes up.

Can someone else run it?

Yes. HarperCo runs payroll as the payroll add-on, charged on top of your monthly scope. For biweekly or semi-monthly pay it is $150 a month, plus $8 per employee per month. For weekly pay it is $225 a month, plus $8 per employee per month. Two ROEs a year are included. Extra ones are $25 each. Setting it up is a one-time $250.

It covers pay runs, the deductions you send the CRA, ROEs, T4 and T4A slips, and the annual return to your province’s workers’ compensation board (WCB PEI, WCB Nova Scotia, WorkSafeNB or WorkplaceNL). You can add it to any scope from Monthly Books Bank-Ready up, and to the Fisher Plan. Monthly Books Plus includes biweekly pay for your first 10 employees.

Key facts

• You remit income tax, CPP and EI deducted, plus an equal CPP share and 1.4 times the EI premium (CRA, T4001).
• Regular remitters: due the 15th of the following month. Quarterly remitters: April 15, July 15, October 15, January 15 (CRA, when to remit).
• Late penalties: 3%, 5%, 7% or 10% by days late. 20% for repeated knowing failures in a year (CRA, late remitting).
• Directors: jointly and severally liable. Assessment within two years of ceasing to be a director (CRA, IC89-2R3).
• T4 slips and return: last day of February (CRA, when to file).
• Electronic ROE: 5 calendar days after the end of the pay period with the interruption (ESDC, ROE guide).
• Workers’ compensation: the annual return goes to your province’s board. WCB PEI renews by February 28 (WCB PEI); WCB Nova Scotia, WorkSafeNB and WorkplaceNL set their own dates.

Notes like this are general information, not advice on your specific situation — that’s what the kitchen table is for. — Dominic