How to Calculate and Report Payroll Remittance in Canada

Managing payroll remittances is a crucial responsibility for Canadian business owners. Ensuring accurate payroll deductions and timely remittances to the Canada Revenue Agency (CRA) helps businesses remain compliant with tax regulations and avoid penalties. This guide will walk you through everything you need to know about calculating and reporting payroll remittance in Canada, including key considerations, deadlines, and best practices.

Table of Contents

1. What is Payroll Remittance
2. Step 1: Understanding Employer Responsibilities
3. Step 2: Calculating Payroll Deductions
4. Step 3: Payroll Remittance Deadlines
5. Step 4: Submitting Payroll Remittance to the CRA
6. Step 5: Year-End Payroll Reporting
7. Common Payroll Remittance Mistakes to Avoid
8. How BBA Tax Can Help

What Is Payroll Remittance?

Payroll remittance refers to the process of deducting and submitting payroll taxes from employees’ wages to the CRA. These deductions include:

• Canada Pension Plan (CPP) Contributions
• Employment Insurance (EI) Premiums
• Federal and Provincial Income Taxes

Employers must calculate these deductions accurately, match certain contributions, and remit them to the CRA within designated deadlines.

Step 1: Understanding Employer Responsibilities

As an employer in Canada, you are responsible for:

• Registering for a Payroll Account: Obtain a business number (BN) from the CRA and set up a payroll account.
• Calculating Payroll Deductions: Deduct CPP, EI, and income tax from employee wages.
• Employer Contributions: Match employee CPP contributions and pay 1.4 times the employee EI premium.
• Remitting Payroll Deductions: Submit deductions and employer contributions to the CRA.
• Reporting Payroll Remittances: Provide employees with T4 slips and file annual summaries with the CRA.

Step 2: Calculating Payroll Deductions

1. Canada Pension Plan (CPP) Contributions

For employees aged 18 to 69, CPP contributions are mandatory unless they are exempt. The CPP contribution rate for 2025 (example) is 5.95% on pensionable earnings, up to a maximum annual contribution. Employers must match employee contributions dollar-for-dollar.

2. Employment Insurance (EI) Premiums

EI premiums are deducted from employees’ insurable earnings. The employee EI rate for 2025 (example) is 1.58%, while employers pay 1.4 times the employee contribution.

3. Federal and Provincial Income Tax

Income tax deductions vary based on an employee’s province of residence, earnings, and personal tax credits. Employers should use the CRA payroll deductions online calculator or refer to payroll deduction tables for accurate calculations.

Example Payroll Deduction Calculation

Assume an employee earns $5,000 per month in Ontario. Here’s an example of deductions:

• CPP Deduction (5.95%) = $297.50
• Employer CPP Match = $297.50
• EI Deduction (1.58%) = $79.00
• Employer EI (1.4 x Employee Contribution) = $110.60
• Federal & Provincial Income Tax = $750 (estimate)
• Total Employee Deduction = $1,126.50
• Total Employer Contribution = $408.10

Net Pay to Employee: $3,873.50 Total Cost to Employer: $5,408.10

Step 3: Payroll Remittance Deadlines

Your remittance schedule depends on your business’s average monthly payroll deductions:

• Regular Remitters: Due by the 15th of the following month.
• Quarterly Remitters (small businesses with less than $3,000 monthly deductions): Due April 15, July 15, October 15, and January 15.
• Accelerated Remitters (large employers with high payroll remittances): Due bi-weekly or weekly.

Late remittances can result in penalties ranging from 3% to 10% of the outstanding amount.

Step 4: Submitting Payroll Remittance to the CRA

Employers can remit payroll deductions through various methods:

• Online Banking: Through financial institutions.
• CRA My Business Account: Secure online payment.
• Pre-Authorized Debit (PAD): Set up automatic payments.
• In-Person at Banks: Using a CRA remittance voucher.
• By Mail: Sending a cheque with a completed remittance form.

Step 5: Year-End Payroll Reporting

At the end of each calendar year, employers must:

• Provide T4 Slips to Employees: By February 28.
• Submit a T4 Summary to the CRA: By February 28.
• Reconcile Payroll Deductions: Ensure all amounts remitted match T4 slips.

Common Payroll Remittance Mistakes to Avoid

1. Incorrect Calculations: Using outdated tax rates.
2. Late Remittances: Resulting in penalties.
3. Failure to Submit T4 Slips: Leading to CRA compliance issues.
4. Misclassifying Employees: Independent contractors vs. employees.
5. Missing Payroll Deductions: Skipping CPP or EI deductions.

How BBA Tax Can Help

Payroll remittance compliance can be complex. BBA Tax, a trusted Ottawa accounting firm, offers:

• Accurate Payroll Processing: Ensuring compliance with CRA guidelines.
• Automated Payroll Remittance Services: Avoid late fees and miscalculations.
• Expert Tax Planning: Minimizing employer tax burdens.
• Year-End Reporting Assistance: Streamlining T4 submissions and reconciliations.

Accurate payroll remittance is essential for Canadian business owners to remain compliant with CRA regulations. By following best practices, meeting deadlines, and using expert payroll services like BBA Tax, you can ensure a seamless payroll process.

Need Help with Payroll Remittance? Contact BBA Tax Today!

📞 Call us at (613) 722-6638
📧 Email us at admin@bbatax.ca