Payroll Compliance in Canada: Avoiding CRA Penalties

Clear steps, practical examples, and easy-to-scan guides for Canadian small businesses.

The Big Picture

Payroll looks simple until it isn’t. Paying staff is just the start; staying compliant means calculating the right deductions, filing the right slips, and remitting on time—every time. One missed deadline or a tiny miscalculation can trigger CRA penalties that add up quickly.

Key idea (CRA-aligned): Each pay run must correctly withhold Income Tax, CPP, and EI, and those source deductions must be remitted to the CRA on your assigned schedule.

What the CRA Expects

Accurate withholdings for Income Tax, CPP, and EI on each pay.
Remit on time according to your remitter type (regular, quarterly, or accelerated).
Issue year-end slips (T4/T4A) correctly and by the CRA deadline (typically by end of February).
Keep payroll records for at least six years from the end of the last tax year they relate to.

Heads-up: Worker status matters. Misclassifying an employee as a contractor can lead to reassessments for CPP/EI and penalties.

Common Pain Points (and Safe Fixes)

Late remittances: set calendar reminders and automate payments where possible.
Wrong CPP/EI rates: update payroll software at the start of each calendar year.
Messy year-end: reconcile payroll reports monthly so T4s are clean and on time.
Poor record-keeping: store pay stubs, remittance proofs, and CRA letters in a secure cloud folder.

Tooling tip: Using recognized payroll software (e.g., QuickBooks Payroll, Wagepoint, Ceridian) helps keep rates current and supports electronic filing. You still remain responsible for accuracy—review summaries before submitting.

Remittance Timing—CRA framing

Your due date depends on your remitter type:

Remitter Type	Typical Case	General Due Date (examples)
Regular (monthly)	Most small businesses	By the 15th of the following month
Quarterly	New/small with low average monthly withholdings and in good standing	Quarterly dates assigned by CRA (confirm eligibility first)
Accelerated	Higher withholdings	Up to twice monthly or more frequently (check CRA notice)

Year-End Snapshot

T4/T4A: provide to employees and file with CRA (by end of Feb, usually)

Reconcile: payroll vs. bank & general ledger

Archive: keep records for ≥ 6 years

If you’re behind: Don’t ignore it. Gather bank statements and payroll reports, note missed periods, and contact your bookkeeper or the CRA. Early action can reduce penalties and interest.

Mini Example

Paying an employee $4,000 gross in Ontario? Your software calculates Income Tax, CPP, and EI using current rates. You remit those amounts by your assigned due date (e.g., the 15th for regular remitters), record employer CPP/EI, and keep the pay stub plus remittance confirmation. Repeat consistently and year-end filings become predictable.

Quick Checklist

Open a CRA payroll account before your first pay run.
Enable CRA direct deposit & online mail.
Automate remittances and set calendar reminders.
Lock prior payroll periods after review to prevent accidental edits.
Back up pay stubs, T-slips, and CRA correspondence in the cloud.
Document employee vs. contractor decisions with notes and contracts.

Penalty Watch

CRA penalties can apply for late/insufficient remittances and late/inaccurate information returns. Interest accrues daily. Staying current is always cheaper than catching up.

FAQ

How long do I need to keep payroll records?

At least six years from the end of the last tax year they relate to. Digital copies are acceptable if legible and safely stored.

Do I need a payroll account before hiring?

Yes. Register with the CRA so remittances and information returns map to your account from day one.

What if I remitted the wrong amount?

Correct it as soon as you notice. Contact the CRA or adjust on your next remittance and keep documentation of the correction.

Sources (CRA)

This article is general guidance and doesn’t replace professional advice. Always confirm specific deadlines and rates with the CRA for your situation.

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