Introduction
When a corporation begins paying salaries — whether to the owner, to employees, or both — it takes on a set of ongoing obligations that operate on a fixed schedule, regardless of how busy the business is. Payroll remittances are among the most time-sensitive CRA obligations a corporation has, and the penalties for late payment are among the steepest.
This article explains what payroll remittances are, how the remittance schedule works, and what small corporations need to know to stay compliant.
What Is a Payroll Remittance?
When a corporation pays employment income, it is required to withhold certain source deductions from each payment and remit them to the CRA on behalf of the employee. These source deductions include:
• Federal and provincial income tax (based on the employee's TD1 forms and applicable tax tables)
• Canada Pension Plan (CPP) contributions — both the employee portion withheld and the employer's matching contribution
• Employment Insurance (EI) premiums — both the employee portion withheld and the employer's portion (at 1.4 times the employee rate)
The corporation is acting as a collection agent for the CRA. The amounts withheld do not belong to the corporation — they are held in trust and must be remitted on schedule.
Opening a Payroll Account
Before issuing the first paycheque, the corporation must register for a payroll deductions account with the CRA. This is a separate account from the corporation's business number (BN) and HST account. The payroll account takes the format: 123456789 RP 0001.
Registration can be done online through the CRA's My Business Account portal or by phone.
Remittance Schedules
The CRA assigns corporations a remittance frequency based on their average monthly withholdings. There are three main categories:
Regular remitters: Corporations whose average monthly withholdings are less than $25,000. Remittances are due by the 15th of the month following the month in which payroll was paid. This is the most common category for small corporations.
Quarterly remitters: New businesses and very small remitters may qualify for quarterly remittances — due the 15th of the month following the end of each quarter. Eligibility is based on a clean compliance history and low remittance amounts.
Accelerated remitters (Threshold 1 and 2): Larger corporations with higher average monthly withholdings have more frequent remittance obligations. Threshold 1 remitters must remit twice monthly; Threshold 2 remitters must remit within a few days of payroll. Most incorporated professionals and small corporations will be regular remitters.
The Consequences of Late Remittances
The CRA takes late payroll remittances seriously. Penalties apply as follows:
• 3% if one to three days late
• 5% if four or five days late
• 7% if six or seven days late
• 10% if more than seven days late, or if no remittance is made
• 20% for repeat violations in a calendar year, or if the failure was made knowingly or under circumstances amounting to gross negligence
Interest also accrues on any outstanding balance. Unlike some other CRA penalties, payroll remittance penalties are not easily waived under the Taxpayer Relief Provisions — the CRA views these obligations as particularly strict because the withheld amounts are trust funds belonging to employees.
Directors' liability: This is a point that matters for incorporated business owners specifically. If a corporation fails to remit source deductions, the CRA can hold directors personally liable for the unremitted amounts, interest, and penalties. This is one of the few instances in Canadian tax law where the corporate veil can be pierced to reach an individual. Directors who take reasonable care to ensure compliance — and who resign before a corporation defaults — may have a due diligence defence, but this is fact-specific.
T4 Filing: The Annual Summary
At the end of each calendar year, the corporation must file T4 slips for every employee who received employment income, along with a T4 Summary. The deadline is the last day of February of the following year.
T4s must reflect the total employment income, income tax withheld, CPP contributions, and EI premiums for each employee. Failure to file T4s on time carries its own penalties.
Owner-Manager Payroll
For owner-managers paying themselves a salary, the process is the same as for any other employee — payroll deductions must be withheld and remitted on schedule. Some incorporated professionals process payroll regularly throughout the year; others pay a lump-sum salary or bonus at year end. Either approach can work, but the remittance timing rules apply regardless of when the payment is made.
Year-end bonuses declared before the fiscal year end and paid within 180 days may be deductible in the current fiscal year — but the payroll obligations attach at the time of payment.
When to Speak With a CPA
If your corporation is just starting to pay salaries — or if you have been managing payroll informally without proper source deductions — a conversation with a CPA can help you set up a clean, compliant process before problems accumulate.