Here’s a handy guide that breaks down everything you need to know about managing your payroll deduction remittances.
Required payroll remittances
Required payroll remittances include the following source deductions taken from your employees’ incomes, along with the employer’s share of contributions and premiums:
- Canadian Pension Plan (CPP) contributions
- Employment insurance (EI) premiums
- Federal, provincial or territorial income tax
- Remittance categorization and schedule
The remittance submission schedule for payroll deductions is determined by the business' average monthly withholding amount (AMWA) or the sum of all payroll deductions paid to the CRA within a calendar year, averaged on a monthly cadence.
Your remittance classification and subsequent remittance due dates are categorized by your company’s yearly AMWA data.
You are a New Remitter if:
- You are a new employer or an employer who has never made remittance payments before
- Your remittances are due on the 15th day of the month following the one in which deductions were made
You are a Regular Remitter if:
- You are a new employer with less than two-years of AMWA history or have a two-year AMWA of less than $25,000 CAD
- Your remittances are due on the 15th day of the month following the one in which deductions were made
You are an Accelerated Remitter if:
A) You are an employer with a two-year AMWA of $25,000 to $99,999.99 (Threshold 1)
- For Threshold 1 Accelerated Remitters, remittances for payroll processed within the first 15 days of the month are due on the 25th day of that same month.
- For payroll processed on the 16th day of the month to the end of that same month, remittances are due by the 10th day of the following month.
B) You are an employer with a two-year AMWA greater than $100,000 (Threshold 2)
- For Threshold 2 Accelerated Remitters, remittances for processed payroll are due by the third business day (excluding Saturdays, Sundays, and public holidays) after the end of the following periods: from the 1st to the 7th day of the month, from the 8th to the 14th day of the month, from the 15th to the 21st day of the month, and from the 22nd to the last day of the month. the 7th day of the month, the 8th to the 14th day of the month, the 15th to the 21st day of the month, and the 22nd to the last day of the month.
- In the case of the above excluded dates, the CRA considers payments to be on time if received on the next business day.
You are a Quarterly Remitter if
- You have a small business with an AMWA of less than $3,000 in the previous two years and maintain a perfect compliance history with the CRA
- Your remittances are due on or before April 15, July 15, October 15, and January 15 for the total payrolls processed in the previous quarter
The due dates for remittances are based upon the exact date in which your employees were paid
Payroll remittance process
The payroll remittance process includes the completion of the following Statement of Account for Current Source Deduction remittance voucher forms:
- Form PD7A for regular and quarterly remitters
- Form PD7A(TM) for accelerated remitters
Payroll deductions must be held in trust in a separate account from your normal operating account.
Remittance payments can be submitted electronically, in person at your local financial institution, or by mail (with the exception being threshold 2 accelerated remitter payments, which must be remitted electronically or in person).
Payroll remittance errors
Deduction errors in calculating your payroll remittances, such as if you discovered you have under-remitted or over-remitted, happens. It is important to alert the CRA and rectify any spotted discrepancies as soon as possible.
What if you remit less?
If you remitted less, remit the amounts to the CRA immediately and indicate the remitting periods they apply to. Note that the CRA may apply a late remitting penalty and interest if your correct remittance is late.
What if you remit more?
If you remitted more, reduce your next remittance for this year by the amount of the over-remittance. If the over-remittance occurred last year, you can request a transfer or refund of the credit from the CRA.
Note that for over-deductions and under-deductions of income tax, you can make an adjustment on a subsequent pay if caught in the current year. If the mistake is found in the following year, the adjustment will be made once the employee files his or her next tax return.
For more information on handling over-deductions and under-deductions of EI premiums, click here.
For more information on handling over-deductions and under-deductions of CPP contributions, click here.
Late remittance penalty charges
Timeliness and accuracy are of utmost importance when submitting remittances. The CRA issues high penalty charges for late payroll deduction remittances. Penalties are also charged for non-compliance with deducting the correct CPP contributions, EI premiums, or income tax from the amounts paid to your employees.
Missed payment fines are generally applied to outstanding balances of $500 or more, and the penalties are based on daily compound interest. The minimum penalty is 10% of the outstanding total. If the failure to deduct is found to have been made knowingly or due to gross negligence, the charge percentage increases to 20%.
The CRA’s penalty structure for late or missing payments is as follows:
- 3% if your payment is 1-3 days late
- 5% if your payment is 4-5 days late
- 7% if your payment is 6-7 days late
- 10% if your payment is more than 7 days late or if your payment is not submitted
- 20% for repeat failures and violations
Remittances are considered to have been made on the day they are received by the CRA. In order to avoid penalties for remitting your payroll deductions, it is ideal to make remittances to their financial institution two to three days before the due date to avoid fines.
