Guide to Canadian Payroll Deductions for Employers in 2019

February 25, 2018 | Written by: Sohail Afzal

Tax Accounting Services Toronto
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As your business expands, you will find the need to hire people to work for you. Being an employer comes with numerous responsibilities. An important one is making sure your employees are paid properly. The CRA has set up stringent requirements for employers to remit the right payroll deductions. If you make any mistakes when doing payroll, your business might face hefty penalties and fines. So here’s a simple guide to help you understand payroll deductions and what it means for you as an employer.
Simple steps to running payroll
  • 1. The first step is to open a payroll account with CRA which is what you’ll be operating whenever you pay your employees.
  • 2. Secondly, come up with a system to collect all the information from your employees as part of the hiring process. This includes a social insurance number (SIN).
  • 3. On each pay period, you will be required to make an appropriate deduction from each of your employee’s pay.
  • 4. The payroll deductions will then be remitted to the CRA as required.
  • 5. Once all this is done, the last step is to ensure you report each income and deductions when filing your returns before the deadline.

What to Check When Collecting Information from Employees

You will need to collect the SIN of each employee. Each document needs to be examined and recorded exactly as it appears. When looking at the SIN, make sure you take note of those social insurance numbers that start with a “9”. This is an indication that the person is not a Canadian citizen or permanent resident so may not be able to work for you unless he/she is authorized by the IRCC.

Adding Taxable Benefits

Taxable benefits include things like a company car, low-interest loan or accommodation that you have provided to your employee. This type of benefit should be added to the employee’s income each pay period. Taxable benefits are added first before payroll deductions because the total income you get will determine how much is deducted in form of taxes. Some taxable benefits may be subject to GST/HST.

Canadian Payroll Deductions

Once you add all the taxable benefits to the employee’s income, the next step is to make the payroll deduction. Start with the government program deductions which are the income tax, Canada Pension Plan contributions, and Employment Insurance premiums. Some organizations have specific deductions that apply to them. For instance, you may have life insurance or retirement plans that should also be considered as part of the payroll deductions.

Remitting Employee Payroll Deductions

The CRA will send you a remittance form whenever the payroll deduction remittance is due. However, this is not the case for new businesses/employers. For a new employer, send a check or money order with a letter that states that you are a new remitter and provides other information such as the period your remittance covers, your business number, address and telephone number. Keep in mind that hiring a tax accountant to prepare your tax bill will save you money in the long run so it’s a worthwhile business expense. [/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section]
Sohail Afzal CPA Toronto

Sohail Afzal, CPA, CMA, MBA

Sohail Afzal, (CPA, CMA, MBA) is the founder & CEO of GTA Accounting Professional Corporation. He is a highly experienced Chartered Professional Accountant and businessman himself and understands the challenges that many businesses face when it comes to cash flow management. As an experienced business consultant & tax advisor, he is helping companies grow by providing the technical, financial, and contractual information necessary for strategic decision-making.

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