Knowing Your CRA Payroll Reporting Obligations
As a small business owner, the last thing you need is trouble with the CRA. Knowing your CRA payroll obligations is vital to avoiding hefty fines in the future.
There are many obligations that you, as a small business owner, must face when running your business. Meeting your CRA payroll obligations is not the least among them, and this aspect of running your business is not a simple one. The Canada Revenue Agency pays much attention to this area of running your business, and because of this every small business owner must meet several payroll obligations. Submitting the right paperwork for each requirement to the CRA may take time, but if done correctly, will lead to financial savings and far less stress in the future.
What are my payroll requirements?
If your business has a BN (Business Number) and you have employees, then you must have a payroll program account associated with your number.
Other than the need for a payroll program account, there are a few major requirements you must know for record-keeping that you must include in your CRA payroll reporting. First, you must keep accurate records for all employee insurance (EI) and remit the deduction to the CRA on a regular basis (see section below.) Secondly, your business will be required to keep records and remit deductions for CPP (Canada Pension Plan) costs. You will need to withhold and remit the employer and employee contributions for EI and CPP.
Small business owners must also remit deductions for all federal, provincial, and territorial taxes to the CRA.
How often do I make remittance payments?
Remittance payments should be made regularly, which will help your small business’s status with the CRA. Payments can be made monthly, quarterly, or 2-4 times per month. Your payment schedule will depend on how much your business withholds from payroll each month. If you withhold less than $1,000 per month, your small business can make remittance payments quarterly. It’s also possible to qualify for quarterly payments if you have a good record of compliance, your payroll account is at least a year old, and you’ve withheld less than $3,000 per month.
At between $3,000 withheld and $25,000 withheld, you’ll make your remittance payments monthly, and at $25,000 to $100,000 you’ll make your payments to the CRA twice per month. At $100,000 withheld, businesses will make payments four times monthly.
What if I pay my employees with cash or fail to remit?
Paying employees with cash, inaccurate CRA payroll reporting, or failing to make regular payments to the CRA can be dangerous for your small business. Knowing the penalties for such negligence should encourage you to put in the work to avoid such catastrophic penalties. No matter what your situation, you can be penalized for failing to remit EI, CPP, and any taxes that apply.
Penalties can apply to failure to remit, late payments, and even gross negligence. Your employees could also lose their qualification for EI if you fail to remit the correct amount to the CRA. On top of the penalties and interest that could result, your business will not be able to claim wages as a business expense due to the lack of accurate payroll records.
If your small business is ready to go to the next level and needs an experienced accounting partner to meet that goal, contact us today to get started.