Chapter 8 - Payroll Remittances and Year-End Reporting (plus Versioning History)
Summary :From Deduction to Remittance
Once an employer withholds Canada Pension Plan (CPP) contributions, Employment Insurance (EI) premiums, and income tax from an employee's pay, those amounts do not stay with the employer. They must be forwarded, along with the employer's own matching CPP contribution and 1.4-times EI premium, to the Canada Revenue Agency (CRA) by a deadline that depends on the employer's remitter type. This forwarding step is called a remittance, and it is distinct from the payment itself: the payment is what the employee receives after deductions, while the remittance is what the employer sends to the government on the employee's and the employer's behalf.
A remittance is considered on time if the CRA receives it on or before the next business day following the due date, and a due date that falls on a Saturday, Sunday, or federal public holiday is pushed to the next business day rather than counted as late. Employers in Quebec follow a parallel structure: CPP is replaced by the Quebec Pension Plan (QPP), and a Quebec Parental Insurance Plan (QPIP) premium is added, with QPP, QPIP, and provincial tax going to Revenu Quebec while CPP, EI, and federal tax still go to the CRA.
How Remittances Are Paid
Employers can remit in several ways: online banking using the payroll business number and business bank account, in person at a Canadian bank, credit union, or Canada Post outlet accompanied by a PD7A Statement of Account for Current Source Deductions, through the CRA's My Payment service by debit card, credit card, PayPal, or Interac e-transfer, or by pre-authorized debit. Many employers instead outsource remittance entirely to a third-party payroll provider such as ADP, Ceridian, Payworks, or Wave Payroll, which calculates, withholds, and remits on the employer's behalf as part of running payroll.
Remitter Types and Remittance Schedules
The CRA assigns every employer a remitter type based on their average monthly withholding amount (AMWA), which sets both the remitting frequency and the length of the remitting period. A new small employer with an AMWA between $0 and $999.99 and a perfect compliance history remits quarterly, as does an employer whose account has been open twelve months or longer with an AMWA between $0 and $2,999.99. A regular remitter, covering an AMWA from $0 to $24,999.99, remits monthly for each calendar month. A Threshold 1 accelerated remitter, with an AMWA from $25,000.00 to $99,999.99, remits up to twice a month, once for the 1st to the 15th and once for the 16th to the end of the month. A Threshold 2 accelerated remitter, with an AMWA of $100,000.00 or more, remits up to four times a month, in roughly weekly periods running from the 1st to the 7th, the 8th to the 14th, the 15th to the 21st, and the 22nd to the end of the month.
Consider Solstice Fabrication Ltd., a metal parts manufacturer with fifty-four employees. Its payroll department calculates that combined CPP, EI, and income tax withholdings average $61,400 a month over the prior calendar year. That places Solstice in the Threshold 1 accelerated bracket, so instead of one monthly remittance, its payroll administrator, Renata, prepares two remittances each month: one covering pay dated the 1st through the 15th, due a few business days after that period ends, and a second covering pay dated the 16th through the end of the month. If Solstice's withholding amount later climbed past $100,000 a month, perhaps after acquiring a second production line and hiring additional staff, it would move into the Threshold 2 bracket and shift to near-weekly remittances instead.
Penalties for Late Remittance and Late Filing
The CRA applies a graduated penalty scale tied to how late a remittance is and the amount involved. Where more than $500 was deducted but not sent, or sent late, the penalty is 3% of the amount if payment is one to three days late, 7% if it is six or seven days late, and 10% if it is more than seven days late or never remitted at all. Where the deducted amount is under $500 and the employer knowingly, or through gross negligence, failed to remit or remitted late, the penalty is 20% if this is the second or subsequent such failure assessed against the employer within a calendar year.
A separate penalty scale applies to information returns, such as T4 slips, filed late. Filing one to fifty returns late carries a penalty between $10 and $1,000; fifty-one to five hundred late returns, between $15 and $1,500; five hundred one to two thousand five hundred, between $25 and $2,500; two thousand five hundred one to ten thousand, between $50 and $5,000; and ten thousand or more, between $75 and $7,500. If Solstice Fabrication missed its mid-month remittance by five days, the shortfall would fall into the 7% band; if the same shortfall stretched to ten days, it would move into the 10% band, which is a meaningful incentive to build remittance dates directly into the payroll calendar rather than treating them as an afterthought.
Employer Liability for Missed Deductions and Garnishments
If an employer fails to deduct the correct CPP contributions or EI premiums, the employer remains liable for both the employer and employee shares, even if the shortfall can no longer be recovered from the employee, and the CRA may add penalties and interest on top. Where the employer under-deducts income tax, a penalty may apply, and the employer must notify the affected employee, who can then either settle the difference when filing their personal tax return or file an updated TD1 form asking for extra tax to be withheld going forward. In general, the CRA can assess a penalty equal to 10% of any CPP, EI, or income tax the employer failed to deduct.
Employers must also administer wage garnishments correctly. A garnishment order requires the employer to withhold part of an employee's wages for an obligation such as unpaid debt or child support and to remit that amount to the authority named in the order. Garnishments cannot be applied against the very first pay period after an order is received, and the employer must remit the garnished funds within fifteen days after the second pay period, then continue remitting at the end of each following pay period until the debt is satisfied. Persistent errors in any of these areas expose the employer to CRA penalties and to legal claims for unpaid wages from employees.
Provincial Health and Payroll Taxes
Five provinces levy a payroll-based health tax on employers, calculated on total annual payroll rather than on individual employee pay: British Columbia, Manitoba, Newfoundland and Labrador, Ontario, and Quebec. Each uses its own tiered rate structure, generally exempting very small payrolls and applying progressively higher effective rates as total payroll rises through several bands, with Ontario's structure containing the most bands of the five and Quebec's varying further by sector, including separate treatment for the primary and manufacturing sectors and for public-sector employers. The Northwest Territories and Nunavut charge health care premiums on individual income instead, and those premiums are not classified as an income tax.
Workers' Compensation Board Annual Reporting
Every Workers' Compensation Board (WCB) requires employers to file an annual report of assessable earnings, and the deadline depends on jurisdiction. Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, the Northwest Territories, Nunavut, Prince Edward Island, and Quebec all set February 28 as the annual reporting due date, while Ontario and Saskatchewan allow until March 31. Missing the deadline can trigger estimated assessments or penalties from the relevant board, so payroll teams typically flag it on the same year-end calendar used for T4 preparation.
T4 Slips and the T4 Summary
Employers must issue T4 slips to employees by the end of February following the tax year, reporting employment income, deductions, and other amounts needed for the employee's personal tax return, and must also file a T4 Summary with the CRA consolidating every T4 issued for that calendar year. An employer that paid independent contractors or certain other income, such as a pension, may additionally need to issue T4A slips and a T4A Summary. Electronic filing becomes mandatory once an employer issues more than five T4 slips for a calendar year filed after December 31, or fifty or more if filed before January 1 of the following year, and the CRA can penalize employers who fail to file electronically once that threshold is crossed.
The CRA describes an eight-step process for T4 filing: determine whether a T4 slip is required, determine the due date, decide on a filing method, follow the general guidelines for T4 slips and summaries, complete the identification section of each slip, complete the remaining slip details, complete the T4 Summary, and file the completed return. Working through these steps in order, rather than skipping ahead to data entry, helps catch employees who need a slip but were missed and catches formatting issues before submission.
Internal Year-End Payroll Register Reconciliation
Separately from filing with the CRA and the WCB, payroll teams close out the year by reconciling their own payroll register. The recommended sequence is to gather all payroll-related documents and confirm they are complete, compare the payroll register against the financial statements and general ledger accounts, identify and correct any discrepancies found in that comparison, review year-to-date figures for each employee for inconsistencies, update employee records to reflect any changes made during the year, generate the year-end payroll reports the organization needs, and retain proper documentation of both the records and the reports produced. Alongside this reconciliation, employers should check for premium, rate, and legislative changes, since CPP contribution rates, EI premium rates, and provincial tax rates are all subject to periodic revision, and using a stale rate table into the new year produces errors that surface only when employees or the CRA flag them.
Quick Revision Summary
A remittance forwards withheld CPP, EI, and income tax, plus the employer's own CPP and EI share, to the CRA (or Revenu Quebec for Quebec-specific amounts) on a schedule set by the employer's remitter type: quarterly, regular monthly, Threshold 1 accelerated (twice monthly), or Threshold 2 accelerated (up to four times monthly), based on the average monthly withholding amount. Late or missed remittances carry penalties from 3% up to 20% depending on lateness and repeat offences, and late information-return filing carries a separate penalty scale from $10 to $7,500 depending on volume. Employers remain liable for under-deducted CPP, EI, and income tax, must administer wage garnishments on the CRA's timeline, and in five provinces owe a payroll-based health tax. Year-end work adds WCB annual reporting (mostly due February 28, with Ontario and Saskatchewan due March 31), T4 slip and T4 Summary filing by the end of February, and an internal payroll register reconciliation before the new year's rates take effect.