CRA Payroll Remittances: The Basics
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. In this blog post, we will delve deeper into payroll remittances and provide you with the information you need to ensure compliance with CRA regulations, including:
- Remittance terminology
- Determining your remittance frequency
- How to remit
- What happens if you don't remit correctly
- Best Practices for Ensuring Compliance with CRA Regulations
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.
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):
How to Remit to the CRA
There have been some updates to remittance payment methods in 2024. Most notably, Starting January 1, 2024, any payments or remittances to the Receiver General of Canada exceeding $10,000 must be submitted as an electronic payment.
This process can be easily automated through a payroll service provider. Across all our service tiers, PayTrak will calculate deductions and remit then to the CRA on your behalf.
Moreover, your options for remitting to the CRA may vary, depending on your remitter type. If you are a quarterly, regular or accelerate remitter with a threshold 1, you can use any approved method including electronic payment, or payment at a financial institution. You may also qualify for the new remittance method to make a reconciliation payment on or before the last day of February.
If you are an accelerated remitter with a threshold 2 you must remit either electronically or at your Canadian financial institution.
According to the CRA, in order to make a payment at a Canadian financial institution, you must use the original paper remittance voucher. Photocopies and faxes are not accepted.
You can learn more about making remittance payments here.
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, reach out to the CRA directly for additional support, or consider automating the calculation of source deductions and remittances. You can also download our 2024 Ultimate Payroll Guide for additional payroll information and resources.
