<span id="hs_cos_wrapper_name" class="hs_cos_wrapper hs_cos_wrapper_meta_field hs_cos_wrapper_type_text" style="" data-hs-cos-general-type="meta_field" data-hs-cos-type="text" >Top 5 Things You Need to Calculate Canadian Payroll Tax</span>

There’s no doubt that one of the most challenging aspects of payroll can be calculating payroll taxes for your employees. This task could become particularly tricky if you’re not familiar with how payroll tax works in an international market.

That’s the situation many American employers find themselves in when it comes time to calculate Canadian payroll tax. If this sounds familiar, make sure you keep these five tools handy.

1. An Up-to-Date Canadian Payroll Tax Calculator

When attempting to calculate Canadian payroll tax, have a calculator handy. There are some paid options, but many free calculators work just as well.


Next, make sure your Canadian payroll tax calculator is up to date. Some free calculators may not have the latest information. Always check that you’re using the latest version from a reputable source.


Why is it so important to have an up-to-date calculator? Tax tables do change from year to year. Recently, the federal government of Canada has also been making changes to what’s considered taxable income as well, which can affect your calculations. An up-to-date calculator will help guide you.

2. The Provincial Tax Tables

The next tool on the list is the tax tables for the province you operate in. While your Canadian payroll tax calculator should operate with the latest information, it never hurts to double-check the information from the official source.


Tables issued from the provincial governments may also include increases for the next few years, and information about where the current cut-offs are for different tax brackets. While this should be in your tax calculator as well, the tables can provide a quick and easy-to-read reference.

3. The CRA’s Guidance on Taxable Income and Benefits

One of the most difficult parts of calculating Canadian payroll tax is deciphering what counts as taxable income and what doesn’t.


Some entries seem straightforward, such as salary and wage earnings. Overtime and bonuses may be handled in a different way. Income such as earnings from the redemption of stock options could be taxed using yet another method.

The “taxable benefits” category creates the most confusion for employers and payroll specialists. To make the situation more complex, the federal government has revised what counts as a taxable benefit in recent years.


For that reason, it’s always best to check in with the CRA and determine if the benefit you’re offering is considered taxable or non-taxable.

4. Information about Other Withholdings

Income tax isn’t the only thing you need to withhold as an employer in Canada. You’ll have to take deductions for Employment Insurance and the Canada Pension Plan.

Again, a good Canadian payroll tax calculator will have information about EI and CPP deductions built into it. It’s still a good idea to get the information from the CRA and use that to double-check your calculations.


One reason you’ll want to be careful with EI and CPP deductions is because there’s an employer match on these deductions. Employees pay a portion of EI and CPP, but employers are expected to provide the other portion. That money comes out of your own coffers, so you’ll want to be sure you’ve calculated it correctly.


There’s another reason to pay careful attention to EI, and that’s because you may provide a “top up” to employees who take leave through the EI program. You’ll need to know their entitlements and how your “top up” will affect what they receive from the program.


5. Bonus: Your Remittance Schedule

The final tool you require for Canadian payroll tax calculation is your remittance schedule. This is available from the CRA. Since many penalties are based on the timeliness of payment, you’ll want to ensure you have the right schedule.


If you’re concerned about handling Canadian payroll tax on your own, another option is to work with a PEO. They can help you manage all of these aspects of payroll with the right tools and expert know-how.