Taking care of payroll for a Canadian company? If so, you've got some very specific rules and procedures to follow, and it's important to get everything right. If you've set up a business and hired people to work for you, it's your job as an employer to pay them properly, and that means operating and maintaining a CRA account, collecting information from employees, making appropriate deductions, remitting these deductions, calculating and remitting your employer taxes, and taking care of year-end reporting. Let's examine these tasks in more detail.
Employee Payroll Tax
As soon as you hire employees, you must open a payroll account with the Canada Revenue Agency. This account will be used for remitting your employees' payroll deductions. Once your set up an account with the CRA, you will collect information from employees, such as their SIN numbers and work status. Ideally, this should take place as part of the hiring process.
For each pay period, your payroll duties should include deducting funds from your employees' paychecks for income tax, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums. For each of these deductions, you'll need to refer to the appropriate provincial or territorial tables where the employees report for work. Every province has different employer taxes and rates for those taxes. This becomes especially complicated when you have employees in different provinces because you'll have different calculations and different government accounts. Remember that if you employ any workers in Quebec, you'll need to deduct funds for a different pension plan, the QPP (Quebec Pension Plan).
Employer Payroll Tax
Not only do you have to worry about calculating your employees' taxes, but you also have to pay employer taxes, over and beyond your employees' taxes. These employer taxes include the Employer's percentage of EI and CPP as well as worker's compensation and the Employee Health Tax (EHT) in Ontario.
Once you've tabulated the deductions for each employee, it's your responsibility as an employer to remit the funds to the CRA. Once you remit for the first time, you will be sent a remittance form to send in when you take care of monthly payroll. For the first time, however, send a letter explaining that you are a new remitter, along with a check for the total remittance amount, and be sure to send along your Business Number.
If you only had to remit to only one agency, this task wouldn't be too difficult, but you have to deal with three different government accounts (payroll tax, EHT, and worker’s compensation) on a regular basis. These accounts often have different remittance frequencies; an average company will have remittances due to three different agencies during the month, but the remittances will all be due at different times.
At the end of the calendar year, you have some payroll work to do. You must complete a T4 slip for each employee, summarizing all tax, CPP, and EI contributions for the year. After you've completed all of your T4 slips, you will complete a T4 summary form, which will be submitted to the CRA. These forms will be used to help employees and the CRA reconcile and tabulate taxes, contributions, and premiums for the year.
Staying on top of payroll can be very time- and resource-consuming for a small business, not to mention the administrative headaches involved. If you find that you'd rather source out these tasks to a professional payroll service provider, contact us at The Payroll Edge. For more than 25 years, we've been taking care of payroll so our clients can take care of their businesses.