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Employing Canadian Workers? Our Business Taxes Can Be Quite the Pain!

Posted by Stacey Duggan

|

Aug 7, 2014 8:35:00 AM

Business and Payroll taxes can be a pain for U.S. based companiesEmploying Canadian workers and deducting the correct Canadian payroll taxes from their paycheques can be difficult if you’re an American or foreign company outside of North America. We’ve compiled a list of Canadian taxes a company employing Canadian workers should be aware of, if they are not engaging with an Employer of Record service.

Canadian Business Taxes

All Canadian businesses must file a corporate tax return with the Canadian government. This corporate tax return is due within the six months after the end of the company’s fiscal year.

If you are engaging with Canadian companies for the sale of your product or service you need to be aware of the sales tax for the province you are doing business in. For goods and services sold in Canada, every company must charge the applicable provincial sales tax. The same is true in the reverse, if you purchase goods and services in Canada, you will be charged the sales tax. You are then required to reconcile these debits and credits to pay or report to the Canada Revenue Agency. Every province has a different rate and the remittance schedule can vary as well based on company size. In Ontario, it is called the HST (Harmonized Sales Tax) and the rate charged is currently 13%, in Alberta that rate is 5% for their GST (Goods and Services Tax). For a full list of HST/GST rates by province, please visit the Canada Revenue Agency’s website.

Another tax to be aware of as a foreign company is the possibility of the 15% withholding tax. If a U.S. or foreign company chooses not to register a Canadian business presence but does engage in a sales transaction with a company in Canada, that company must withhold and remit 15% of any payments for services rendered in Canada.

Canadian Payroll Taxes

Some taxes are consistent for all employers across Canada such as the Canada Pension Plan (CPP), Employment Insurance (EI) and Worker’s Compensation.  These taxes may be consistently seen across all provinces and territories but the rate that they are charged can vary.

Other taxes are province or territory specific. For example, in Ontario employers must pay the Employer Health Tax (EHT) and in Quebec there are three additional taxes over and above the federal ones. Please visit the Canada Revenue Agency’s website for further information on provincial payroll taxes and rates.

If you have not engaged an Employer of Record here in Canada and have successfully registered your business, enrolled for the various government accounts and are up to date on your taxation responsibilities, you may be ready to hire your first employee.

If you’d prefer to have an Employer of Record handle the complexities of Canadian employment law, contact The Payroll Edge today and we’ll take care of the workforce compliance issues for you! 

7 Signs It's Time to Outsource Payroll

Topics: Payroll Tax, Payroll Tax in Canada, Employee Payroll Deductions, CRA Payroll Tax, Payroll Deductions, Calculating Taxes in Canada, Employee Payroll Tax, Small Businesses Payroll

A Canadian Payroll Class May Not be The Right Choice

Posted by Stacey Duggan

|

Jul 29, 2014 8:30:00 AM

Canadian Payroll Class FrustrationWhen it comes to understanding Canadian payroll, your first instinct may be to enrol in a payroll class to help your payroll and HR department learn the specifics.  For those companies outside of Canada, this search is in effort to understand foreign payroll compliance and is often handed over to someone hesitant to learn a new set of laws when they are already comfortable with their own. 

Canadian rules and regulations when it comes to paying an employee can be vastly different, especially when compared to a country such as the United States.  These differences can exert a level of frustration on the payroll or HR person who is already schooled in one set of legislative compliance.

When it comes to choosing a Canadian payroll class ensure that part of the curriculum covers the following:

  • Federal payroll taxes including the Canada Pension Plan, Employment Insurance and Worker’s Compensation.
  • The additional provincial payroll taxes as they vary from province to province (ensure the class covers the province that most interests you as many payroll classes will avoid Quebec due to its complicated nature)
  • Employee and Employer deductions and the remittance schedules assigned to each tax account.
  • Employment standards when it comes to overtime, statutory holiday pay and vacation pay and a section on how these vary from province to province as well.

Not only should the above information be covered in a Canadian payroll class but the payroll and HR department need to be aware of the over 1700 rules and regulations when it comes to the Employment Standards Act which also varies from province to province.

Ensure that the Canadian payroll class you register your in house payroll person includes information on:

  • Health & Safety and a Return to Work program should your worker be injured.
  • Termination and pay in lieu of notice.  Note: there is no ‘At Will’ employment in Canada.
  • How to properly compose an employment contract ensuring that all clauses meet employment minimums.

What are the chances that not only will the Canadian payroll class offer all of the above, but that your payroll and HR person taking the class will retain all of the information?  How will they keep up to date on the ever-evolving employment regulations and changes to tax law?  Most likely the Canadian payroll class will offer nothing more than an overview of the functions and processes of paying an employee

What outsourcing your Canadian payroll to The Payroll Edge will bring:

  • Complete compliance when it comes to calculating payroll taxation.
  • Correct, on time remittances with all government bodies in every province.
  • Employment standards expertise ensuring you meet your due diligence.
  • Certified experts who understand the law and keep up to date on its changes.
  • The freedom to focus on your business.

Canadian payroll processing doesn’t have to be complicated and you don’t have to take a new field of study to get it done. The Payroll Edge is a Canadian based payroll processing company specializing in helping American and foreign companies expand their workforce into Canada by acting as the employer of record (EOR), a similar service to a PEO in the U.S.  We also take care of small businesses in Canada who don’t have the time or expertise for payroll.

The Payroll Edge offers seamless workforce expansion into Canada without the daunting task of understanding foreign employment compliance. Contact us today for more information on how we can help your business.

12 Things an American Company Looking to Hire a Worker in Canada Needs to Know

Topics: Canadian Payroll Deductions, Employee Payroll Deductions, Payroll Tax Tips, U.S. Business operating in Canada, Paying a Canadian, Calculating Taxes in Canada, Canadian payroll class

Is Your Canadian Small Business Adhering to Government Payroll Standards?

Posted by Karen McMullen

|

Nov 22, 2013 9:00:00 AM

Is Your Canadian Small Business Adhering to Government Payroll StandardsOne of the most important, and challenging, aspects of running a small business is maintaining compliance with payroll regulations. Federal and provincial payroll regulations are incredibly complex, and affect everything from reporting requirements to how pay statements are structured. Understanding and applying all of these payroll regulations correctly is time consuming, and there is no room for error. Simple mistakes can lead to financial and legal problems that can cost your business a fortune. Maintaining compliance isn’t easy, and requires an investment of time, effort, and money.

Reporting and Remittance

Payroll regulations governing employee withholdings and employer contributions can differ depending on the type of business you operate and the employees you hire. Dates for remittances also vary, depending on your previous average monthly withholding amounts (AMWA). As your business grows or shrinks, the reporting dates and requirements can change significantly. If you’re handling payroll yourself, keeping up with all of these changes is your responsibility. Late or incorrect remittances can lead to audits, fines, and back payments.

Piles of Paperwork

Accurate documentation is often your only defence in an audit. The CRA recommends that you keep payroll records for 36 months, though they are not limited to a 36-month period for audits. To be on the safe side, you need to make sure that all of your timekeeping and reporting records are up to the latest standards. All of your documentation that contains employee information must be stored in a secure location, for your protection and the employees’. Upon request, any and all documentation must be turned over to the CRA or other authorities for examination.

Employee Classifications

Payroll regulations can also vary widely, depending on the types of services you’re paying for. Like many businesses, you may employ non-citizens, visiting workers, interns, and independent contractors. Each class has different reporting requirements, making it necessary to set up different pay schemes for different employees. You also have to be aware of payroll regulations that can affect an employee’s classification. Failing to adhere to the regulations could turn an independent contractor into a full-time employee—leaving you on the hook for past remittances and payments. Each classification has its own rules and regulations, adding another layer of difficulty to handling payroll.

Always Learning

Perhaps the most difficult aspect of payroll regulations is their constant evolution. These rules change from year to year, if not more frequently. The application of these rules can change from one government agency to the next. Having an understanding of these regulations one day is no guarantee of the same understanding the next day. The only way to assure constant compliance is through constant training and practice. Whoever is handling your payroll must be able to attend training seminars and conferences, read legal texts, meet with government officials, and practice all the things they’ve learned. Even small gaps in their knowledge or experience can prove costly.

Hassle-Free Compliance

An outsourced payroll provider offers an easy way to avoid these problems. They make it their business to stay up to date on changing regulations, and to incorporate those changes into their regular routine. Employees at a payroll service receive constant training, as well as constant experience in applying that training. They frequently interact with auditors and agents, so they know how the laws are actually being applied, versus how they’re written on paper. All of this knowledge and experience helps them avoid compliance issues, and successfully defend businesses that are accused of compliance lapses. When you factor in the associated costs of training, software, legal representation, and possible fines, payroll service providers are an affordable, reliable alternative.

7 Signs It's Time to Outsource Payroll

Topics: Payroll Service Provider, Outsourced Payroll Service, Canadian Payroll, Canadian Payroll Regulations, Employee Payroll Deductions, CRA, CRA Compliant, Small Businesses Payroll, Small Business Operations

Canadian Payroll Tax Calculations - What You Need to Know

Posted by Stacey Duggan

|

Nov 18, 2013 1:20:00 PM

Canadian Payroll Tax Calculations   What You Need to KnowIn an effort to save money, it can be tempting to try to handle as many tasks as possible in-house. Many businesses are asking their personnel to handle a growing list of responsibilities, regardless of their training or expertise. While some tasks afford a margin of error, and allow for time to learn the responsibilities, handling Canadian payroll tax responsibilities isn’t one of those tasks. If you’re considering handling Canadian payroll tax compliance in-house, there are a few things you should know beforehand.

It’s Not Easy

Canadian payroll tax laws are complex and difficult to learn, let alone master. To make matters worse, the application of those laws can change from one situation to the next, and may not be applied the same way by every agency. Learning which laws apply in which situation takes time and experience. During that time, any mistakes can cost the business dearly. The CRA, and other agencies, won’t accept ignorance or inexperience as an excuse for non-compliance. At best, mistakes will result in back payments, along with the associated costs of processing and distributing new cheques. At worst, fines and criminal penalties can be imposed for any errors in reporting or remittances.

It’s Not Constant

Learning Canadian payroll tax laws is a constant process. The laws, at all levels, change frequently. These changes can be in the form of new legislation, changes to existing legislation, or differences in application from year to year. Staying on top of these changes requires constant vigilance on the part of your personnel. They’ll have to attend seminars, training sessions, and read up on proposed and actual changes. This investment of time and effort will come directly out of their overall productivity. If they make any mistakes with the new legislation, any savings you enjoy by handling Canadian payroll tax in-house will quickly disappear.

It’s Not Without Risk

All of the time, effort, and money invested in training your personnel can vanish after a single CRA audit. Government agencies have stepped up their compliance checks, meaning more agents looking for more mistakes. The fines and penalties for first-time offenders have risen steadily in recent years, making any errors more costly. Even the best training, and intentions, aren’t a substitute for experience. While your personnel are trying to develop that experience, the CRA will be watching for any slip-ups.

There’s an Easier Way

Using your in-house personnel to handle Canadian payroll tax compliance may appear to save you money on upfront costs. You’re already paying your personnel, so why not add to their responsibilities? However, when you add in the cost of training, the lost productivity, and the potential fines and penalties, it becomes a losing proposition. There are ways to cut expenses that don’t put your business at greater risk of a government audit. Using an outsourced payroll provider saves you the expense of constant training, and keeps your personnel focused on tasks that directly benefit your business pursuits. A payroll provider also minimizes the risk of a government audit, saving you money on fines and legal representation during government actions. When you do the math, it just makes sense to let a payroll provider handle your Canadian payroll tax obligations.

Canadian Payroll Tax Deduction Calculator

Topics: Payroll Service Provider, Outsourced Payroll Service, Canadian Payroll, Canadian Payroll Deductions, Payroll Tax Calculations, CRA Audit, Canadian Payroll Regulations, Employee Payroll Deductions, Payroll Calculator, CRA, CRA Payroll Tax, Payroll Deductions

3 Ways Outsourced Payroll Processing Saves You Money

Posted by Stacey Duggan

|

Oct 18, 2013 9:00:00 AM

3 Ways Outsourced Payroll Processing Saves You MoneyCanadian businesses large and small can save money by using outsourced payroll processing. Payroll processing is a necessary part of every firm that employs people, but it doesn't have to consume much of your time, resources, and focus. By outsourcing this task, you can reduce your overhead costs, find freedom from fines, and enjoy greater accuracy in your payroll.

1. Reduced Overhead Costs.

Some firms choose to hire a payroll clerk to take care of payroll processing. They figure they'll have greater in-house control over the process, and they might feel that communication will be easier when payroll processing is just a few steps away. Proximity and control can often be elusive, however, especially when you realize that these "benefits" can be extremely costly. One of the biggest drawbacks of choosing to hire your own payroll clerk instead of working with outsourced payroll processing is that you then assume additional headcount HR overhead costs. By adding another full-time employee to your payroll, you assume the clerk's wages, benefits, and other employee burdens such as Canada Pension Plan (CPP) contributions and Employment Insurance (EI) premiums, not to mention paid vacation and sick days and health benefits premiums. You can reduce your overhead costs (and quite a bit of time and effort) by using outsourced payroll processing.

2. Freedom from Fines.

Regulatory changes plague Canadian businesses because they're difficult to keep up with, and the fines for ignoring the changes can be steep. Your own in-house payroll clerk will have a difficult time staying abreast of changes that can affect payroll processing, remittances, Employment Insurance, provincial and federal regulations, and more. When you entrust this work to an outsourced payroll processing firm, you are guaranteed to be compliant with all regulatory changes. Not only does this give you peace of mind and save you from administrative aggravation, but it also can save you from having to pay fines.

3. Greater Accuracy.

Along with the cost of hiring your own payroll clerk, if you take care of payroll processing in-house, you'll also incur the costs of payroll software and support systems. This software can be expensive, and there's no guarantee that it will always work perfectly and stay up-to-date with regulatory changes. Of course, there's a range of payroll processing software out there, from inexpensive and glitchy to break-the-bank expensive and robust. You'll have to make decisions about payroll processing software without having the benefit of experiencing them first-hand to judge them well. When you work with outsourced payroll processing, however, there are experts taking care of all of this for you. Since it's their business to guarantee that your payroll is processed correctly, on-time, and fully compliant with the law, outsourced payroll processing firms spend a great deal of resources on ensuring that their systems are robust, current, and fail-safe.

When you use an outsourced payroll processing firm to handle the details of your firm's payroll, you save money. You save money in overhead costs, fines, and accuracy. You can be confident that you're not overpaying any taxes or other government contributions. If saving money was the only benefit, it would be well worth it to go with a payroll processing firm, but that's not where the benefits end. In addition to saving money, you have the peace of mind of knowing that a major part of your firm is being handled by experts with years of experience in their field. Your payroll will always be on time and fully compliant with federal and provincial regulations. You can put payroll out of your mind and focus your efforts on more interesting and gratifying aspects of your business, which only you can handle.

7 Signs It's Time to Outsource Payroll

Topics: Payroll Service Provider, Outsourced Payroll Service, Employee Payroll Deductions, Government Compliance, Canadian Payroll Service, Payroll Calculator, Great Payroll Service Provider, CRA Compliant

3 Ways Payroll Processing Can Be Made More Efficient

Posted by Ray Gonder

|

Oct 4, 2013 4:18:00 PM

3 Ways Payroll Processing Can Be Made More EfficientProcessing payroll adds a thick layer of administrative work to your already hectic days. Payroll is complicated, ever-changing, and annoyingly details-oriented. In an effort to streamline operations and be more efficient, Canadian employers generally opt for one of the following three methods.

1. Forget About It.

Sure, you'll still pay your employees, but you won't bother with all that troublesome CRA stuff. Think about it: if you didn't have to maintain your CRA account, calculate deductions, take care of payroll remittance, and mess with those troublesome T4 Slips and year-end reports, you'd be as free as a bird. You could get so much more done. You could actually focus on the exciting and profitable parts of your business.

There's just one problem with this method of processing payroll . It's so illegal that your business will probably not last very long. The first month or two that you fail to deduct and remit payroll taxes from your employees' pay cheques, the CRA will levy fines, penalties, and interest on your company. If you still persist in ignoring your legally obligated payroll duties, you may be prosecuted, fined again, and possibly even imprisoned. Clearly, this is not a good option for streamlining your company's payroll processing.

2. Hire a Full-Time Payroll Clerk.

If you've decided that the first option is not for you, you might consider hiring a full-time payroll clerk. A full-time payroll clerk would have time to take care of all the details for you so you would be free to manage your business and do what you do best. Essentially, you'd be hiring an employee to take care of administrative work that doesn't directly benefit your business. And you'd have to pay for benefits for this employee, including employer contributions to benefits and Employment Insurance.

This gets to be quite expensive, and although you'd have a person on your staff to manage the day-to-day headaches incurred by processing payroll, you're still ultimately responsible for this person's job performance. If your full-time payroll clerk doesn't have the experience to manage complicated payroll issues, or if the laws change and your clerk is unaware of the changes, you're still responsible for any problems. So while this option is better than the first option, it still comes with some drawbacks. Is there a better way?

3. Outsource Payroll Processing.

Wise employers know better than to neglect payroll responsibilities or to hire a full-time, on-staff worker to handle them. They know that forming a partnership with a payroll processing service provider can get them expert service at a reasonable price, leaving them time to focus on running and growing their businesses.

Payroll service providers like The Payroll Edge can guarantee that your payroll will be processed correctly every time, and they have experts on-staff who can answer tricky questions and find solutions to unusual circumstances. They have contacts at the CRA, so it's easier for them to reach governmental agencies to get specific answers than it would be for you or for one of your employees. Best of all, a reputable payroll processing firm will understand the details of your payroll, ensure its accuracy, and know how your payroll affects your company's legal compliance. A partner like this is an incredible asset to your company.

If processing payroll has become a heavy burden for you and for your company, do yourself the favor of investigating the third option: outsourcing payroll processing. To learn more about how outsourced payroll processing can benefit your company, contact us at The Payroll Edge.

7 Signs It's Time to Outsource Payroll

Topics: Payroll Service Provider, Payroll Service, Payroll, Employee Payroll Deductions, Government Compliance, Best Payroll Calculator, CRA, payroll solution, Dependable Payroll Service

5 Reasons Businesses Dread Processing Payroll

Posted by Stacey Duggan

|

Aug 27, 2013 10:00:00 AM

Reasons Businesses Dread Processing PayrollIt's no surprise that processing payroll is toward the bottom of the list of tasks that business owners like to do. In fact, it wouldn't be a stretch to say that most business owners dread processing payroll. On the surface, processing payroll seems like a fairly simple and straightforward business responsibility, but anyone with payroll experience knows that there are reasons to dread it. Here are five.

1. Paperwork.

There might be a few people out there who enjoy paperwork, but if you feel that there are never enough hours in the day, paperwork can be a real thorn in your side. And with payroll processing, the paperwork is endless.

From the moment you hire an employee, you have to start keeping track of paperwork for that person. Not only do you have to stay on top of deductions, taxes, and contributions for each employee every pay period, but you also need to keep accurate enough records to complete end-of-year reports for the CRA. It takes an organized person with solid systems to keep all of this paperwork straight.

2. Deductions.

It's the employer's responsibility to deduct Employment Insurance premiums, Canada Pension Plan contributions, and income taxes from the employees' paycheques. Each of these deductions has its own formula and its own rules, and the employer is responsible for correctly figuring out each amount.

The CRA has an online calculator to help employers with these calculations, but pay close attention to the disclaimers: "You assume the risk associated with using this calculator," and "The reliability of the calculations produced depends on the accuracy of the information you provide." Therefore, you can't use the online calculator as an excuse if you end up with mistakes in your deductions.

3. Remitting.

Once you've finally figured out how much to deduct from each of your employees' paycheques, it's time to face the next dreaded task: remitting the deductions to the CRA. Monthly payroll deductions are due the 15th of each month, and your remittance needs to arrive on time. If it's just a day late, you'll face a fine, which we'll talk about next.

4. Fines.

If the CRA finds that your business is not properly remitting CPP contributions, EI premiums, and income tax, your business will be fined. If this happens more than once in a calendar year, the CRA will levy an additional fine. These fines can be a huge hit to your company's bottom line as well as to your morale as an employer.

5. Changing laws and regulations.

Many small business owners find that over time they can get the hang of payroll processing. It can become part of their daily, weekly, and monthly routines. But then, as new laws are passed, the rules change, and they find themselves back at square one. Laws related to payroll processing change frequently, and it can be quite difficult for harried business owners to keep on top of all the changes.

One solution to handling these dreaded payroll processing tasks is to turn your payroll tasks over to a third-party payroll service provider like The Payroll Edge. These services are experts in the details. They know the laws and rules, and they have systems in place to keep your business running smoothly.

7 Signs It's Time to Outsource Payroll

Topics: Payroll, Employee Payroll Deductions, hire payroll service, Payroll Calculator, CRA, Payroll Deductions, Great Payroll Service Provider, CPP, EI, Employee Payroll Tax, Small Business Payroll

3 Common CRA Remittance Pitfalls

Posted by Stacey Duggan

|

Jul 24, 2013 9:00:00 AM

3 Common CRA Remittance PitfallsIt seems that remitting your payroll deductions to the CRA should be a simple, straightforward process, and yet, Canadian businesses run into problems time and again. Part of this has to do with legislative and bureaucratic changes that catch people unawares. Sometimes small business owners just have too many things on their minds; it's hard to keep up with everything, especially with things like CRA remittances which don't help your business to stay afloat or improve your bottom line. Let's take a look at three common CRA remittance pitfalls and how to avoid them.

1. Not sending in your remittance on time

This is probably the biggest mistake that employers make, and it's no surprise. The money collected from payroll may sit in your business account for weeks or even months before it's due to the CRA, so it's easy to forget about remitting. Do your best to stay on schedule, however, because the penalties for failing to remit are stiff and increase the more time you take. Not only the fee but the whole amount is subject to interest making a late payment much more costly than the timely payment would have been.

Companies with a 12-month history of remitting compliance and who have a monthly withholding amount of less than $3,000 may be eligible to remit quarterly instead of monthly. You will be notified by the CRA if your business qualifies for quarterly remittance. Otherwise, you'll be expected to remit monthly, and it's important that you keep up with your deadlines.

2. Remitting less because you're treating some employees as independent contractors

A worker engaged with your company who has a registered business, doesn’t always qualify to be paid as an independent contractor in the eyes of the CRA. As a business owner, you need to be aware of how to properly classify independent contractors in order to be compliant. A finding of misclassification can lead to the payment of both the employee and employer portion of the remittances going back as far as the initial engagement. If the CRA finds that you have violated the law, you will also be charged interest and penalties, which can add up very quickly.

3. Calculating remittances incorrectly

It's a lot to keep track of, but you need to remit CPP contributions, income taxes, and EI premiums from your employees' earnings, along with your share of EI premiums and CPP contributions for each employee. Recognizing taxable benefits and calculating then remitting them correctly is another area that is often misunderstood by business owners. Your employee is considered to have received a benefit if you pay or provide to him or her something that is personal in nature such as free use of property, goods or services. If the benefit is deemed taxable you must add the fair market value of the benefit to the employee’s income and tax accordingly.

One thing you can do to help with calculating payroll deductions is to use the CRA's Payroll Deductions Online Calculator. Instead of looking up deduction amounts on the provincial and territorial tables, you can simply enter your data into the calculator. Remember, though, that you assume the risk associated with using the CRA's calculator. If you end up remitting the wrong amount, you can't use the calculator as your excuse.

By taking care with these three CRA remittance pitfalls, you can avoid most of the headaches and frustrations encountered by business owners in the reporting area. Another alternative is to outsource payroll processing and let someone else take care of CRA remittance for you. When you're sure that your CRA remittance is handled correctly, you can face the details of your business confidently and irreproachably.

What Are You Leaving to Chance by Handling Payroll on Your Own

Topics: Payroll Service Provider, Canadian Payroll Deductions, Payroll Tax Calculations, Employee Payroll Deductions, Employment Standards Act, Best Payroll Calculator, MOL, ESA, ESA Compliant, Employee Payroll Tax

Proposed Payroll Changes to Ontario Employer Health Tax

Posted by Stacey Duggan

|

Jul 2, 2013 9:00:00 AM

Ontario PayrollIn May of this year, the Ontario Government revealed its 2013 Budget. The proposed changes to the provincial Employer Health Tax (EHT) if passed, will have a direct impact on those that carry on business in Ontario as well as those that process payroll for those companies affected.

The budget proposes to increase the EHT Exemption from the current $400,000 to $450,000, beginning January 1, 2014. Thereafter, the EHT Exemption will be adjusted every five years with the Government estimating that the EHT Exemption will increase to $500,000 in 2019. 

This is great news for small to mid sized businesses in Ontario but for those companies with an annual payroll of over $5 million, it is proposed that the EHT Exemption be eliminated all together with only registered charities being the exception.

A recent article on Lexology.com states "The Government estimates that, while small businesses will save up to $975 per year, and approximately 12,000 small employers will no longer have any EHT liability, as a consequence of the EHT changes proposed in the Budget, more than 5,000 large employers and associated groups of employers will be required to remit up to $7,800 per year in additional EHT as a consequence of the proposed EHT amendments. These changes reflect a desire of the Government to shift the EHT burden to larger entities, although the Budget papers project that, on a cumulative basis, the proposed EHT changes will actually cost the Government approximately $5 million in each of the 2014-15 and 2015-16 fiscal years." 

Read the Full Article

Topics: Canadian Payroll, Payroll Tax in Canada, Employee Payroll Deductions, Payroll Deductions, Ontario

Payroll Deductions – What You Need to Know

Posted by Ray Gonder

|

May 13, 2013 9:43:00 AM

payroll deductions what you need to knowAfter you have opened a payroll account with the CRA (Canada Revenue Agency), it's time to start collecting information from employees and making appropriate deductions from each employees' paycheque. This sounds easy enough, but it's important to know how to properly make payroll deductions. Otherwise, you can be fined, and your employees' taxes and benefits may be incorrect.

Deducting Income Taxes

Your first step when making payroll deductions is to deduct the appropriate income tax from each employee's paycheque. To find out how much to deduct, use the territorial or provincial tables for the territory or province in which your employees report to work. You can download the tables from the CRA's website, you can use the CRA's Payroll Deductions Online Calculator

Deducting CPP Contributions

For every person you employ between the ages of 18 and 70, you'll need to deduct contributions to CPP (Canada Pension Plan). Like income taxes, CPP contributions can be calculated using charts or by using the online calculator.

Deducting EI Premiums

EI (Employment Insurance) premiums are also deducted from employees' paycheques, but EI premiums are calculated a bit differently than income taxes and CPP contributions. There is no age limit for EI premiums, but there is a yearly maximum amount, and once your employees reach the yearly maximum amount, you stop deducting premiums from their paycheques until the beginning of the following calendar year. Use the CRA's chart of EI premium rates and maximums to determine how much to deduct.

Other Deductions

  • Commissions. If your employees earned commissions during a particular pay periods, you'll need to make the above deductions specifically for their commissions. The CRA's Payroll Deductions Online Calculator has a "Make a Commission Calculation" radio button to help you make the correct deductions.
  • Bonuses. As with commissions, you are responsible for deducting EI premiums, CPP contributions, and income tax on bonuses, whether they occur regularly or just once a year.
  • Retroactive Pay. If you raise an employee's salary and pay retroactive pay to the date the raise was given, you must also make deductions on the retroactive pay. 
  • Director's Fees. You must deduct CPP contributions from payments given to board members, committee members, or directors of a corporation. This applies to both resident and non-resident directors. 

After you've figured out the appropriate payroll deductions for each employee, make sure you remit your deductions in a timely manner. If you're a new remitter, send the money for the remittance amount along with a letter explaining that you're a new business sending payroll remittance. Include the period your remittance covers, your CRA Business Number (which you must apply for before setting up your payroll), and your complete contact information. Once the CRA has your information entered into its system, you'll receive a remittance form in the mail each time your payroll deductions are due.

For more expert information about payroll deductions, or to speak with us about any other payroll issue, contact us at The Payroll Edge.

What Are You Leaving to Chance by Handling Payroll on Your Own

Topics: Payroll Service Provider, Canadian Payroll, Canadian Payroll Deductions, Payroll Service, Payroll, Employee Payroll Deductions, Payroll Calculator, Payroll Deductions

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