Get familiar with the process of remitting to the CRA, including how to access key information and make payments at the right time.
When it comes to managing payroll in Canada, understanding the basics of CRA payroll remittance is essential. As an employer, it is your responsibility to deduct income tax, CPP, and EI from your employees' pay and remit (transfer) these amounts to the Canada Revenue Agency. If you are a new business or running payroll for the first time, you can register for a payroll account by clicking here. Failing to remit correctly can result in penalties and interest charges, so staying on top of your payroll remittance schedule is crucial.
Note: PayTrak will calculate, deduct and remit mandatory source deductions on your behalf as an included function of our payroll services. More details on the remittance process below.
Remittance Terminology
Before we dive in, let's clarify a few of the terms relating to CRA remittance:
- Remitter Type: This is a designation given to you by the CRA. You can view or find out your remitter type on your CRA My Business Account. Your remitter type determines the frequency and required method of your payments to the CRA.
- Remittance Frequency: This refers to how often you must remit source deductions to the CRA. The CRA reviews payroll accounts annually in fall and will notify by mail if your remittance frequency changes.
- AMWA: This stands for Average Monthly Withholding Amount. This refers to the total amount of payroll deductions remitted to the CRA throughout the calendar year, which is then averaged on a monthly basis.
Click here to access the CRA's Employer's Guide - Payroll Deductions and Remittances
Determining Your Remittance Frequency
When setting up or running payroll, it is extremely important to follow the correct remittance frequency. If you fail to comply with the remittance frequency assigned to you by the CRA, you will be charged penalties and interests immediately, which can add up quickly.
Please note that your remittance frequency is subject to change. Each November, the CRA conducts a thorough review of all payroll accounts to determine remitter types. If there are any changes to your remitter type, you will receive written notification. Additionally, the CRA will assess your compliance record to determine if you qualify for a quarterly remitter status.
If you are not sure of your remittance frequency, you can download a PD7A form from your CRA My Business account for clarification. It will look something like this (taken directly from the CRA website):
What Happens if I Don't Remit Correctly?
If your cheque is returned OR if your financial institution refuses to process payment, the CRA will charge up to $25 dollars for each cheque or payment that is returned due to insufficient funds, a closed account of stopped payments.
If you remit late or fail to make a payment all together, the CRA will apply a penalty and charge interest. More details on these penalties and interest charges can be found here.
If the CRA assesses you, make sure to keep your payment for the assessment separate from source deductions and contributions.
Additionally, If you are required to remit electronically or at a financial institution and fail to do so, you may have to pay a penalty.
Ensuring Compliance with CRA Regulations
Maintaining compliance with the CRA is crucial to your business' payroll health. It is important to confirm your remitter type and frequency, and to honor the payment schedule and methods outlined by the CRA. If you are unsure about any aspect of your remittance obligations, you can reach out to the CRA directly for additional support.