Payroll Deductions and Remittances - Employers' Guide - Beth Stuart & Associates

 
Employers’ Guide
Payroll Deductions and Remittances

T4001(E) Rev. 20
Is this guide for you?
Use this guide if you are one of the following:
    ■   an employer
    ■   a trustee
    ■   a payer of other amounts related to employment
    ■   an estate executor, a liquidator, an administrator, or a corporate director
For information on barbers and hairdressers, taxi drivers and drivers of other passenger-carrying vehicles, see page 44.
Do not use this guide if you are self-employed and need coverage under the Canada Pension Plan (CPP) or employment
insurance (EI). Instead, see the Federal Income Tax Guide.

Our publications and personalized correspondence are available
in braille, large print, e-text, or MP3 for those who have a visual
impairment. For more information, go to canada.ca/cra-multiple
-formats or call 1-800-959-5525.

La version française de ce guide est intitulée Guide de l’employeur – Les retenues sur la paie et les versements.

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What’s new?
Canada Pension Plan Enhancement                               The 10% Temporary Wage Subsidy for
The Canada Pension Plan enhancement is introduced             Employers
through a 7 year gradual phase-in starting on January 1,      In response to Covid-19, certain income tax measures have
2019. The CPP contribution rate for 2020 is 5.25%. For more   been enacted to provide relief to employers. The 10%
information, see “CPP contribution rate and maximum” on       Temporary Wage Subsidy (TWS) is one of these measures
page 17.                                                      that will allow eligible employers to reduce the amount of
                                                              the payroll deductions required to be remitted to the
                                                              Canada Revenue Agency. The subsidy is equal to 10% of
                                                              the remuneration you paid from March 18 to June 19, 2020,
                                                              up to $1,375 for each eligible employee. The maximum total
                                                              is $25,000 for each eligible employer. For more information
                                                              on the TWS, go to canada.ca/temporary-wage-subsidy.

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Remittance due dates
In Chapter 8, you will find more information on remitting           View remitting requirements
payroll deductions, including the different remitter types
and due dates, how to make a remittance, and the forms to           You can view your remitting requirements through one of
use.                                                                the following:

When the due date falls on a Saturday, a Sunday, or a                    ■   My Business Account at canada.ca/my-cra
public holiday recognized by the Canada Revenue Agency                       -business-account, if you are the business owner
(CRA), we consider your payment to be on time if we                      ■   Represent a Client
receive it on the next business day. For a list of public                    at canada.ca/taxes-representatives, if you are an
holidays, go to canada.ca/cra-due-dates.                                     authorized employee or representative

                       Remittance thresholds for employer source deductions
  Remitter types            AMWA1                                                  Due dates

  Regular remitter      Less than $25,000 We have to receive your deductions on or before the 15th day of the month after the
                                          month you paid your employees.
  Quarterly remitter    Less than $1,0002 If you are eligible for quarterly remitting, we have to receive your deductions on or
                                and       before the 15th day of the month immediately following the end of each quarter.
                         less than $3,000 The quarters are:

                                            ■   January to March
                                            ■   April to June
                                            ■   July to September
                                            ■ October to December
                                            The due dates are April 15, July 15, October 15, and January 15.
Accelerated remitter       $25,000 to       We have to receive your deductions by the following dates:
    threshold 1            $99,999.99
                                            ■   For remuneration paid in the first 15 days of the month, remittances are due by the
                                                25th day of the same month.
                                            ■   For remuneration paid from the 16th to the end of the month, remittances are due
                                                by the 10th day of the following month.

Accelerated remitter    $100,000 or more    You have to remit your deductions through a Canadian financial institution so that we
    threshold 2                             receive them within three working days following the last day of the following pay
                                            periods:
                                            ■   the 1st through the 7th day of the month
                                            ■   the 8th through the 14th day of the month
                                            ■   the 15th through the 21st day of the month
                                            ■   the 22nd through the last day of the month

1. Average monthly withholding amount
2. This is a monthly withholding amount (MWA), not an AMWA. For more information, go to Chapter 8 starting on page 49.

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Table of contents
                                                                                             Page                                                                                             Page
Chapter 1 – General information .....................................                           7   Amounts and benefits from which you have to
Do you need to register for a payroll program                                                         deduct EI premiums........................................................                21
  account? .............................................................................        7   Employment, benefits, and payments from which
  Contacts and authorized representatives .....................                                 7     you do not deduct EI premiums....................................                         22
  Employment in Quebec...................................................                       7     Employment .....................................................................          22
Are you an employer? .........................................................                  7     Benefits and payments ....................................................                23
  Employment by a trustee ................................................                      8   EI premium rate and maximum ........................................                        24
  Payer of other amounts ...................................................                    8   Employment in Quebec ......................................................                 24
What are your responsibilities? .........................................                       8   Reducing the rate of your EI premiums if you have a
  Keeping records ...............................................................               9     short-term disability plan ...............................................                25
  Social insurance number .................................................                     9   Calculating EI deductions ..................................................                25
  SIN beginning with the number 9 .................................                             9   EI overpayment ...................................................................          25
Payroll Deductions Tables ..................................................                   10   Recovering EI premiums ....................................................                 25
  Which tax tables should you use?..................................                           10   Establishing the number of insurable hours....................                              26
When an employee leaves ..................................................                     11   Record of Employment (ROE) ...........................................                      27
  If you do not have any employees for a period of
                                                                                                    Chapter 4 – Pensionable and Insurable Earnings
     time ................................................................................     11
                                                                                                                 Review (PIER) ..............................................                   27
Changes to your business entity ........................................                       11
                                                                                                    Why is a review important? ...............................................                  27
  If your business stops operating or the partner or
                                                                                                    CPP deficiency calculations ...............................................                 27
     proprietor dies ..............................................................            11
                                                                                                    EI deficiency calculations ...................................................              28
  If you change your legal status, restructure, or
                                                                                                    Security options on PIER listings ......................................                    28
     reorganize......................................................................          12
                                                                                                    Multiple T4 returns .............................................................           28
  If your business amalgamates ........................................                        12
Filing information returns ..................................................                  12   Chapter 5 – Deducting income tax ..................................                         28
Penalties, interest, and other consequences .....................                              13   Form TD1, Personal Tax Credits Return ..........................                            28
  Failure to deduct ..............................................................             13     Employment in Quebec ..................................................                   29
  Penalty for failure to deduct ...........................................                    13     Claim codes ......................................................................        29
  Failure to remit amounts deducted ...............................                            13     Request for more tax deductions from employment
  Penalty for failure to remit and remitting late .............                                13        income ...........................................................................     29
  Interest ...............................................................................     13     Deduction for living in a prescribed zone ....................                            29
  Summary convictions ......................................................                   13   Form TD1X, Statement of Commission Income and
  Director’s liability ............................................................            13     Expenses for Payroll Tax Deductions ...........................                           29
  Cancel or waive penalties or interest ............................                           13     Tax deductions from commission remuneration ........                                      29
How to appeal a payroll assessment or a CPP/EI                                                      Form TD3F, Fisher’s Election to Have Tax Deducted
  ruling .................................................................................     14     at Source ...........................................................................     30
                                                                                                    Remuneration from which you have to deduct
Chapter 2 – Canada Pension Plan contributions ...........                                      14
                                                                                                      income tax ........................................................................       30
Impact of contribution errors .............................................                    14
                                                                                                    Reducing remuneration on which you have to deduct
When to deduct CPP contributions ...................................                           15
                                                                                                      income tax ........................................................................       30
Employment in Quebec ......................................................                    15
                                                                                                      Letter of authority ...........................................................           31
Amounts and benefits from which you have to
                                                                                                      RRSP contributions you withhold from
  deduct CPP contributions ...............................................                     15
                                                                                                         remuneration ................................................................          31
Employment, benefits, and payments from which
                                                                                                      Contributions to an RPP .................................................                 31
  you do not deduct CPP contributions ...........................                              16
                                                                                                    Calculating income tax deductions...................................                        32
  Employment .....................................................................             16
                                                                                                      Tax deductions on other types of income ....................                              32
  Benefits and payments ....................................................                   16
                                                                                                      Labour-sponsored funds tax credits .............................                          32
CPP contribution rate and maximum ...............................                              17
                                                                                                    Non-resident employees who carry out services in
Calculating the CPP deductions ........................................                        17
                                                                                                      Canada ..............................................................................     32
Starting and stopping CPP deductions .............................                             17
                                                                                                      Application for a waiver of tax withholding ...............                               32
  Special situations..............................................................             17
  Checking the amount of CPP you deducted ................                                     18   Chapter 6 – Special payments ..........................................                     32
Commissions paid at irregular intervals ..........................                             20   Advances ..............................................................................     32
CPP overpayment ................................................................               20   Bonuses, retroactive pay increases, or irregular
Recovering CPP contributions ...........................................                       20     amounts ............................................................................      33
CPP coverage by an employer resident outside                                                        Death of an employee .........................................................              34
  Canada...............................................................................        21   Director’s fees ......................................................................      35
Canada’s social security agreements with other                                                        Employment income .......................................................                 35
  countries ............................................................................       21     Director’s fees paid to a corporation
                                                                                                        or partnership...............................................................           36
Chapter 3 – Employment insurance premiums .............                                        21
                                                                                                    Employees profit sharing plan ..........................................                    36
When to deduct EI premiums ............................................                        21

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Overtime pay........................................................................        37     Non-taxable salary or wages paid to Indians ..............                           48
  CPP contributions, EI premiums, and income tax.......                                     37   Placement and employment agency workers .................                              48
Qualifying retroactive lump-sum payments....................                                37   Seasonal agricultural workers program ...........................                      48
  CPP contributions, EI premiums, and income tax.......                                     37   Special or extra duty pay for police officers ....................                     48
Retirement compensation arrangements ..........................                             37
                                                                                                 Chapter 8 – Remitting payroll ..........................................               49
  Withholding and remitting.............................................                    37
                                                                                                 Are you a new remitter? .....................................................          49
Retiring allowances .............................................................           38
                                                                                                 Remitter types and due dates ............................................              49
  Transfer of a retiring allowance .....................................                    38
                                                                                                   Average monthly withholding amount (AMWA) ......                                     49
Salary deferrals ....................................................................       40
                                                                                                   Quarterly remitting for new small employers .............                            49
  Non-prescribed plans or arrangements ........................                             40
                                                                                                   Regular remitter...............................................................      50
  Prescribed plans or arrangements .................................                        40
                                                                                                   Quarterly remitter ...........................................................       50
  Withdrawal from the prescribed plan ...........................                           40
                                                                                                   Accelerated remitter ........................................................        51
Vacation pay and public holidays .....................................                      40
                                                                                                   Associated corporations .................................................            51
  The employee takes holidays .........................................                     40
                                                                                                   Remittance frequency .....................................................           51
  The employee does not take holidays ...........................                           41
                                                                                                   Payment on Filing ...........................................................        51
  Vacation pay trust ............................................................           41
                                                                                                   What if your remittance due date falls on a
Wages in lieu of termination notice ..................................                      41
                                                                                                     Saturday, Sunday, or public holiday? .......................                       51
Wage-loss replacement plans .............................................                   41
                                                                                                 Remittance forms ................................................................      51
Workers’ compensation claims ..........................................                     42
                                                                                                   Form PD7A .......................................................................    52
  Approved claims ..............................................................            42
                                                                                                   Form PD7A(TM) ..............................................................         53
  Denied claims ...................................................................         43
                                                                                                   Form PD7A-RB ................................................................        53
  Advances by a third party ..............................................                  44
                                                                                                   Missing or lost remittance forms ...................................                 54
  Commission des normes, de l’équité, de la santé et
                                                                                                   Not making a remittance ................................................             54
    de la sécurité du travail (CNESST) ............................                         44
                                                                                                 Remittance methods ...........................................................         54
Chapter 7 – Special situations ..........................................                   44   How to make a remittance .................................................             54
Barbers and hairdressers, taxi drivers and drivers of                                              Online payment methods ...............................................               54
   other passenger-carrying vehicles .................................                      44     Other payment methods.................................................               55
   Barbers and hairdressers .................................................               44     Can I request a payment arrangement? .......................                         55
   Taxi drivers and drivers of other                                                               Do you have more than one account? ..........................                        55
     passenger-carrying vehicles........................................                    44   Notice of assessment ...........................................................       55
Emergency services volunteers..........................................                     45   Service bureaus....................................................................    55
   Rules for CPP contributions, EI premiums, and                                                 Remitting error ....................................................................   55
     income tax deductions .................................................                45
                                                                                                 Appendix 1 – Which payroll table should you use? ....                                  56
Employees of a temporary-help service firm ...................                              46
Employing a caregiver, baby-sitter, or domestic                                                  Appendix 2 – Calculation of CPP contributions
   worker ...............................................................................   46              (single pay period) .......................................                 57
   When are you considered to be an employer? .............                                 46
Employment in Canada by certified non-resident                                                   Appendix 3 – Calculation of CPP contributions
   employers..........................................................................      46              (multiple pay periods or year-end
Employment outside Canada.............................................                      46              verification)...................................................            58
   Global Affairs Canada .....................................................              47   Appendix 4 – Canada’s social security agreements
Fishers and employment insurance ..................................                         47              with other countries ....................................                   59
Indian employees.................................................................           47
   Definitions.........................................................................     47   Appendix 5 – Calculation of employee EI premiums
   Guidelines .........................................................................     47              (2020) ..............................................................       60
   Taxable salary or wages paid to Indians.......................                           48   Appendix 6 – Special payments chart.............................                       61
If you paid a retiring allowance to an Indian, see “ ........                               48
                                                                                                 Online services ...................................................................    64
                                                                                                 For more information ........................................................          65

6                                                                                     canada.ca/taxes
Send the QPP, QPIP, and Quebec provincial income tax
Chapter 1 – General information                                  deductions to Revenu Québec, and send the CPP, EI and
                                                                 federal tax deductions to the CRA.
Do you need to register for a payroll
                                                                 If you need more information, you can get the Quebec
program account?                                                 Guide TP-1015.G-V, Guide for Employers: Source
You need to register for a payroll program account if you        Deductions and Contributions, by visiting Revenu Québec
meet any of the following conditions:                            at revenuquebec.ca/en, or you can write to them at:
    ■   pay salaries or wages                                    3800 rue de Marly
                                                                 Québec QC G1X 4A5
    ■   pay tips or gratuities
    ■   pay bonuses or vacation pay                              Are you an employer?
    ■   provide benefits or allowances to employees              Employers have responsibilities they must fulfill. For more
                                                                 information about these responsibilities, see “What are
    ■   need to report, deduct and remit amounts from other      your responsibilities?” on page 8. Employers who do not
        types of remuneration (such as pension or                comply with the payroll requirements may have to pay a
        superannuation)                                          penalty for the deductions not withheld and face other
If you need a payroll program account and you already            consequences. For more information, go to canada.ca
have a business number (BN), you only need to add a              /payroll, and select “Penalties, interest and other
payroll program account to your existing BN. If you don’t        consequences.”
have a BN, you must ask for one and register for a payroll       Employment status directly affects a worker’s entitlement
program account before the date your first remittance is         to EI benefits under the Employment Insurance Act. It can
due.                                                             also affect how a worker is treated under other legislation
For more information on the BN and CRA accounts, or to           such as the Canada Pension Plan and the Income Tax Act.
register online, go to canada.ca/business-number.                Because of this, it is important that you know whether a
                                                                 worker is an employee or a self-employed individual.
Payroll deductions can be complicated. If you are having
trouble with them, go to canada.ca/payroll or                    The facts of the working relationship as a whole decide the
call 1-800-959-5525.                                             employment status. However, we generally consider you to
                                                                 be an employer if one of the following items applies to you:
Contacts and authorized representatives                               ■   you pay salaries, wages (including advances),
As a business owner, partner, director, trustee, or officer of            bonuses, vacation pay, or tips to your employees
a business, you can authorize representatives, including              ■   you provide certain taxable benefits, such as an
your employees, an accountant, a bookkeeper, a lawyer, a                  automobile or allowances to your employees
payroll provider, or a firm, to act on your behalf.
                                                                 Although a written contract might indicate that an
You can authorize a representative (including an employee) by    individual is self-employed (and therefore working under a
submitting an authorization request online through               contract for services), we cannot consider the individual as
Represent a Client at canada.ca/taxes-representatives.           self-employed if there is evidence of an employer-employee
Representatives can access most of the services offered in       relationship. This relationship is referred to in this guide as
My Business Account through Represent a Client                   employment under a contract of service.
at canada.ca/taxes-representatives.                                 Note
                                                                    You may not have to deduct EI premiums if you hire
Employment in Quebec                                                family members or non-related employees. For more
If the employee has to report to your place of business in          information, see page 21.
Quebec or you pay the employee from your place of                If you or a person working for you is not sure of the
business in Quebec, different regulations and employer           worker’s employment status, either one of you can ask the
responsibilities apply.                                          CRA for a ruling. A ruling indicates whether a worker is an
The Quebec provincial government administers its own             employee or self-employed, and whether that worker’s
provincial pension plan called the Quebec Pension                employment is pensionable or insurable.
Plan (QPP), its own provincial income tax, and the Quebec        To ask for a CPP/EI ruling, you can:
Parental Insurance Plan (QPIP), which is also called the
Provincial Parental Insurance Plan (PPIP).                            ■   Log in to My Business Account if you are a payer
                                                                          and select “Request a CPP/EI Ruling.”
Employers with employees in Quebec have to deduct
contributions for the QPP instead of the Canada Pension               ■   Log in to My Account if you are a payer or a worker
Plan (CPP), if the employment is pensionable under the QPP.               and select “Request a CPP/EI Ruling.”
Employers have to take deductions for both the QPIP and               ■     Ask your authorized representative to request a
employment insurance (EI), if the employment is insurable.                ruling for you. They can log in to Represent a Client
                                                                          and select “Request a CPP/EI Ruling.”

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■   Write a letter or fill out Form CPT1, Request for a      prepare and file T4 information returns (slips) in the usual
         CPP/EI Ruling – Employee or Self-Employed?, and          way.
         mail it to the CPP/Rulings Division at the Tax
                                                                  Fees paid to executors, liquidators, or administrators are
         Services Office in the province or territory of your
                                                                  either income from office or employment or business
         residence or place of business. See the table found on
                                                                  income, depending on whether the executor or
         Form CPT1 for the mailing addresses.
                                                                  administrator acts in this capacity in the regular course of
For more information on how we determine a worker’s               business.
employment status, see Guide RC4110, Employee or Self-
                                                                  For more information about fees paid to an executor,
Employed?
                                                                  liquidator, or administrator of an estate and whether they
                                                                  should be included in insurable employment, go
Employment by a trustee                                           to canada.ca/cpp-ei-explained and select “Tenure of
A trustee includes a liquidator, a receiver,                      office.”
a receiver-manager, a trustee in bankruptcy, an assignee, an
executor, an administrator, a sequestrator, or any other          Payer of other amounts
person who does a function similar to the one a trustee
                                                                  A payer of other amounts can be an employer, a trustee, an
performs. A trustee does both of the following:
                                                                  estate executor, a liquidator, an administrator, or a
     ■   authorizes a payment or causes a payment to be           corporate director who pays other types of income related
         made for another person                                  to an employment. This income can include pension or
                                                                  superannuation, lump-sum payments, self-employed
     ■   administers, manages, distributes, winds up,
                                                                  commissions, annuities, retiring allowances, or any other
         controls, or otherwise deals with another person’s
                                                                  type covered in this guide or in Guide RC4157, Deducting
         property, business, estate, or income
                                                                  Income Tax on Pension and Other Income, and Filing the
The trustee is jointly and severally, or solidarily, liable for   T4A Slip and Summary. These amounts have to be reported
deducting and remitting the income tax, CPP, and EI for all       on a T4A slip, with the exception of retiring allowances that
payments the trustee makes.                                       are reported on the T4 slip. For more information, see
                                                                  Guide RC4120, Employers’ Guide – Filing the T4 Slip and
Trustee in bankruptcy                                             Summary.
Under the Canada Pension Plan and the Employment
Insurance Act, the trustee in bankruptcy is the agent of a        What are your responsibilities?
bankrupt employer in the event of an employer’s
                                                                  You are responsible for deducting, remitting, and reporting
liquidation, assignment, or bankruptcy.
                                                                  payroll deductions. You also have responsibilities in
If a bankrupt employer has deducted CPP contributions,            situations such as hiring an employee, when an employee
EI premiums, or income tax from amounts employees                 leaves or if the business ceases its operations.
received before the bankruptcy but has not remitted these
                                                                  The following are the responsibilities of the employer and,
amounts to us, the trustee must hold the amounts in trust.
                                                                  in some circumstances, the trustee and payer:
These amounts are not part of the estate in bankruptcy and
should be kept separate.                                              ■   Open and maintain a payroll program account. If
                                                                          you meet the conditions on page 7 for opening an
If a trustee continues to operate the bankrupt employer’s
                                                                          account, you must register for one.
business, the trustee must get a new business number. The
trustee has to continue to deduct and remit the necessary             ■   Get your employee’s social insurance number (SIN).
CPP contributions, EI premiums, and income tax according                  Every employee must give you their SIN to work in
to the bankrupt employer’s remittance schedule. The                       Canada. For more information, see “Social insurance
trustee should prepare and file T4 information returns                    number” on page 9.
(slips) in the usual way.
                                                                      ■   Get a completed federal Form TD1, Personal Tax
    Note                                                                  Credits Return, and, if applicable, a provincial or
    Amounts a trustee pays to employees of a bankrupt                     territorial Form TD1. New employees or recipients of
    corporation to settle claims for wages that the bankrupt              other amounts such as pension income must fill out
    employer did not pay are taxed as “other income.”                     this form. For more information, see page 28.
    However, this income does not require CPP, EI, and
    income tax withholdings. The trustee has to report these          ■   Deduct CPP contributions, EI premiums, and income
    payments on T4A information returns (slips). For details,             tax from remuneration or other amounts, including
    see Guide RC4157, Deducting Income Tax on Pension                     taxable benefits and allowances, you pay in a pay
    and Other Income, and Filing the T4A Slip and                         period. You should hold these amounts in trust for
    Summary.                                                              the Receiver General and keep them separate from
                                                                          the operating funds of your business. Make sure
All other trustees                                                        these amounts are not part of an estate in
If a trustee continues to operate the employer’s business,                liquidation, assignment, receivership, or bankruptcy.
the trustee needs a new business number. The trustee has to
                                                                      ■   Remit these deductions along with your share of
continue to deduct and remit the necessary
                                                                          CPP contributions and EI premiums. The CPP and
CPP contributions, EI premiums, and income tax according
                                                                          EI chapters of this guide explain how to calculate
to the employer’s remittance schedule. The trustee should

8                                                       canada.ca/taxes
your share of contributions and premiums.               Under the Department of Employment and Social
        Chapter 8 explains how and when to remit these          Development Act, an employee who does not have a SIN
        amounts.                                                when they start working for you has to apply for one and give
                                                                it to you within three days after they receive it. As an
    ■   Report the employee’s income and deductions on the
                                                                employer, you must inform Service Canada within six days of
        appropriate T4 or T4A slip. You must file an
                                                                your employee starting to work for you that this individual
        information return on or before the last day of
                                                                did not give you their SIN. If your employee needs a SIN, refer
        February of the following calendar year. For more
                                                                them to their Service Canada Centre. To find the nearest
        information, see Guide RC4120, Employers’ Guide –
                                                                Service Canada Centre, visit canada.ca/en/employment-social
        Filing the T4 Slip and Summary, and Guide RC4157,
                                                                -development/corporate/portfolio/service-canada.
        Deducting Income Tax on Pension and Other
        Income, and Filing the T4A Slip and Summary.            Make sure the employee gives you their correct name and
                                                                SIN. You may ask for other types of identification, such as a
    ■   Prepare a Record of Employment (ROE) when an
                                                                birth certificate or a certificate of citizenship or permanent
        employee stops working and has an interruption of
                                                                residence, before finalizing their employment documents.
        earnings. For more information, see page 27.
                                                                An incorrect SIN can affect an employee’s future Canada
    ■   Keep records of what you do because our officers        Pension Plan benefits if their record of earnings is not
        can ask to see them. For more information, see          accurate. Also, if you report an incorrect SIN on a T4 slip
        “Keeping records” on this page.                         that has a pension adjustment amount, the employee may
                                                                receive an inaccurate registered retirement savings
  Notes                                                         plan (RRSP) deduction limit statement and the related
  If you are an employer who is resident outside of             information on the employee’s notice of assessment will be
  Canada and you do not have a place of business in             inaccurate.
  Canada, you still have the same responsibilities as
  Canadian employers, regardless of whether the                 When an employee has an interruption of earnings, you
  Canadian resident employee carries out the services in        have to record the correct SIN on a ROE for employment
  Canada or outside Canada. For more information about          insurance purposes (for details on the ROE, see page 27). If
  CPP coverage by an employer resident outside Canada,          you don’t provide a correct ROE, you could be fined up to
  see page 21.                                                  $2,000, imprisoned for up to six months, or both.
  You have to deduct CPP on a non-resident employee’s              Notes
  remuneration in the same way you would for a resident            Even if you have not received your employee’s SIN, you
  employee unless they come from a country with which              still have to make deductions and remit them, and file
  Canada has signed a social security agreement. For more          your information returns on or before the last day of
  information, see “Non-resident employees who carry out           February of the following calendar year. If you don’t,
  services in Canada” on page 32.                                  you might get a penalty for remitting or filing late.
                                                                   If you filed a T4 slip without a SIN but received it after,
Keeping records                                                    file an amended T4 slip and include the SIN. See
You have to keep your paper and electronic records for at          Guide RC4120, Employers’ Guide – Filing the T4 Slip
least six years after the year to which they relate. If you        and Summary, for instructions on how to amend a
want to destroy them before the six-year period is over, fill      T4 slip.
out Form T137, Request for Destruction of Records, and
                                                                For more information, see Information Circular IC82-2,
send it to your tax services office. For more information, go
                                                                Social Insurance Number Legislation that Relates to the
to canada.ca/taxes-records.
                                                                Preparation of Information Slips, or visit Service Canada
                                                                at canada.ca/en/employment-social-development/corporate
Social insurance number                                         /portfolio/service-canada.
As an employer, you have to ask your employees for their
social insurance number (SIN) within three days of when         SIN beginning with the number 9
they start to work for you, and record their number. If an
                                                                An eligible person who is not a Canadian citizen or a
employee does not give you their SIN, you must be able to
                                                                permanent resident of Canada and who applies for a SIN
show that you made a reasonable effort to get it. An
                                                                will get one beginning with the number 9.
example of a reasonable effort would be if, after asking
your employee for their SIN many times, you decide to           If you hire a person whom you know is not a Canadian
contact them in writing to request their SIN. Make note of      citizen or permanent resident, make sure you confirm all of
the dates you asked for the SIN verbally, and keep copies of    the following:
any written requests. If you do not make a reasonable effort
                                                                     ■   the person’s SIN begins with 9
to get a SIN, you may have to pay a penalty of $100 for each
number you don’t try to get.                                         ■   the SIN has not expired
Employees who are in pensionable or insurable                        ■   the person has a valid work permit issued by
employment also have to give you their SIN within three                  Immigration, Refugees and Citizenship Canada
days of starting to work for you and they can be penalized
$100 for each time they don’t provide it.

                                                   canada.ca/taxes                                                               9
Notes                                                         working in Canada beyond the limits of any province, or
     Social insurance numbers beginning with a 9 are valid         outside Canada.
     only until the expiry date shown on the Immigration,
     Refugees and Citizenship Canada document authorizing          Which tax tables should you use?
     the person to work in Canada. You must see the
                                                                   Employment income
     employee’s existing immigration document authorizing
     them to work in Canada (for example, work permit,             When you pay employment income such as salaries, wages,
     study permit) and verify that it has not expired.             or commissions, you have to determine your employee’s
                                                                   province or territory of employment so you can withhold
     If the immigration document has expired, ask the              the proper deductions. This depends on whether your
     employee to contact Immigration, Refugees and                 employee physically reports for work at your establishment
     Citizenship Canada to get a valid document.                   or “place of business.”
     If the person has a SIN that begins with the number 9         For income tax, CPP and EI withholding purposes, an
     and it does not have an expiry date, the SIN is not valid.    “establishment of the employer” is any place or premises in
     Refer the person to the nearest Service Canada Centre.        Canada that is owned, leased or rented by you and where
                                                                   one or more employees report to work or from which one
     Your employees have to inform you of any new expiry
                                                                   or more employees are paid.
     date for their SIN within three days after they receive it.
                                                                   This does not have to be a permanent physical location. For
     If the eligible person then becomes a Canadian citizen or
                                                                   example, the place of business for a construction company
     permanent resident of Canada, they will receive a
                                                                   can be one or more construction sites or the place of
     permanent SIN.
                                                                   business for a carnival can include a shopping mall parking
                                                                   lot. In these examples, the employee’s province or territory
Payroll Deductions Tables                                          of employment would be the one in which the field office
The Payroll Deduction Tables help you calculate                    or shopping mall is located.
CPP contributions, EI premiums, and the amount of                  For more information on which tax tables to use, see
federal, provincial (except Quebec), and territorial income        Appendix 1 on page 56.
tax that you have to deduct from amounts you pay each
pay period.                                                        Employee reports to your establishment
                                                                   If your employee reports to your establishment in person,
     Note                                                          the employee’s province or territory of employment is the
     A pay period means the period for which you pay               one in which your establishment is located. There is no
     earnings or other remuneration to an employee.                minimum amount of time the employee has to report to
The CRA encourages employers to take advantage of our              that place.
electronic payroll deductions services:
      ■   Payroll Deductions Online Calculator (PDOC) –            Example 1
          You can use this application to calculate payroll        Your head office is in Ontario, but you need your employee
          deductions for all provinces and territories except      to report to your place of business in Manitoba. In this case,
          Quebec. It calculates payroll deductions for the most    use the Manitoba Payroll Deductions Tables.
          common pay periods (such as weekly or biweekly),
          based on exact salary figures. You will find the         Example 2
          PDOC at canada.ca/pdoc.                                  Your employee lives in Quebec, but you need your
                                                                   employee to report to your place of business in
      ■   Payroll Deductions Tables (T4032) – Use these            New Brunswick. In this case, use the New Brunswick
          tables to calculate payroll deductions for the most      Payroll Deductions Tables.
          common pay periods. They are available
          at canada.ca/payroll.                                    Example 3
      ■   Payroll Deductions Supplementary Tables                  Your employee works from a home office in Alberta, but
          (T4008) – Use these tables to calculate payroll          occasionally has to report to your Alberta office. You pay
          deductions for irregular pay periods (for example,       your employee from your head office in Ontario. Use the
          10 times per year or daily). They are available          Alberta Payroll Deductions Tables since the employee
          at canada.ca/payroll.                                    sometimes reports to your Alberta office.

      ■   Payroll Deductions Formulas (T4127) – You may
          want to use these formulas instead of the tables to      Employee does not report to your establishment
          calculate your employees’ payroll deductions. This       If your employee does not have to report to your
          guide contains formulas to calculate                     establishment in person (for example, the employment
          CPP contributions, EI premiums, and federal,             contract says the employee works from a home office), the
          provincial (except Quebec), and territorial income       employee’s province or territory of employment is the one
          tax. They are available at canada.ca/payroll.            from where your employee’s salary and wages are paid.
                                                                   This will normally be the location of your payroll
All the Payroll Deduction Tables are available for each            department or payroll records.
province and territory (except Quebec) and for employees

10                                                        canada.ca/taxes
you have to issue it within five calendar days of the
Example 4                                                        employee’s interruption of earnings or the date you become
Your employee does not have to report to any of your             aware of the interruption of earnings. However, special rules
places of business, but you pay the employee from your           may apply.
office in Quebec. In this case, use the Quebec Payroll
Deductions Tables. The employee does not have to pay             For more information, or to get the publication called How to
CPP contributions, but may have to pay Quebec Pension            Complete the Record of Employment Form, go to Service
Plan (QPP) contributions.                                        Canada at canada.ca/record-of-employment. You can also
                                                                 call their Employer Contact Centre at 1-800-367-5693
                                                                 (TTY: 1-855-881-9874).
No establishment in Canada
If your employees are working in Canada but you do not           If you do not have any employees for a period
have a place of business or an employer’s establishment in
Canada, use the Payroll Deductions Tables for In Canada          of time
beyond the limits of any province/territory or outside           Inform us by using the “Provide a nil remittance” service
Canada when deducting income tax at source.                      through My Business Account at canada.ca/my-cra-business
                                                                 -account or through Represent a Client at canada.ca/taxes
                                                                 -representatives, by calling our TeleReply service, or by
Example 5                                                        sending us your completed remittance form and indicating
Your Canadian resident employees work as salespeople in          when you expect to make deductions next. To find out how to
Ontario and British Columbia. They work from their home          use our TeleReply service, see page 54.
offices and report directly to your business located outside
Canada. In this case, use the Payroll Deductions Tables for
In Canada beyond the limits of any province/territory or         Changes to your business entity
outside Canada.                                                  If your business stops operating or the
                                                                 partner or proprietor dies
Special situations                                               If your business stops operating or the partner or proprietor
a) If an employee reports to your place of business for part     dies, you should do the following:
   of a pay period in one province or territory and part in
   another, use the tables for where the employee spent                ■   Remit all CPP contributions, EI premiums, and
   the most time.                                                          income tax deductions withheld for the former
                                                                           employees to your tax centre within seven days of
b) An employee who lives in one province or territory but                  the day your business ends.
   reports to your place of business in another province or
   territory might have too much tax deducted. If so, they             ■   Calculate the pension adjustment (PA) that applies
   can ask you to reduce tax deductions by getting a letter                to your former employees who accrued benefits for
   of authority from the appropriate Taxpayer Services                     the year under your registered pension plan (RPP) or
   Regional Correspondence Centre. For more                                deferred profit sharing plan (DPSP). For information
   information, see “Letter of authority” on page 31.                      on how to calculate pension adjustments, see
                                                                           Guide T4084, Pension Adjustment Guide.
    The opposite could also occur: an employee might not
    have enough tax deducted. In these situations, the                 ■   Fill out and file all T4 or T4A slips and summaries
    employee should ask you to deduct more tax by filling                  using electronic filing methods or on paper, and
    in the “Additional tax to be deducted” section of a new                send them to the Jonquière Tax Centre (at the
    Form TD1, Personal Tax Credits Return and giving it to                 address found at the end of this guide) within
    you.                                                                   30 days from the date your business ends (or 90 days
                                                                           from the date a partner or the sole proprietor dies). If
Non-employment income                                                      you have to prepare more than 50 slips for a calendar
If you pay amounts other than employment income, such                      year, you must file the return electronically over the
as pension income, retiring allowance, or RRSP, use the                    Internet in eXtensible mark-up language (XML) or
provincial or territorial table of the recipient’s province or             with Web Forms. For more information, go
territory of residence.                                                    to canada.ca/taxes-iref.
                                                                       ■   Give copies of the T4 or T4A slips to your former
When an employee leaves                                                    employees.
When an employee stops working for you, we suggest you                 ■   Issue a ROE for each former employee. You
calculate the employee’s earnings for the year to date and                 generally have five calendar days after the end of the
give the employee a T4 slip. Include the information from                  pay period in which an employee’s interruption of
that T4 slip in your T4 return when you file it on or before               earnings occurs to issue a ROE to former employees.
the last day of February of the following year.                            Employees can view their ROE using their
                                                                           My Service Canada Account. For more information,
You must also issue a Record of Employment (ROE) to each                   see “Record of Employment (ROE)” on page 27.
former employee. Generally, if you are issuing an ROE
electronically, you have five calendar days after the end of           ■   When the owner of a sole proprietorship dies, a final
the pay period in which an employee’s interruption of                      income tax and benefit return has to be filed. This
earnings occurs to issue it. If you are issuing a paper ROE,               return is due by June 15 of the year following death,

                                                     canada.ca/taxes                                                            11
unless the date of death is between December 16 and       paid the maximum deductions, take no further deductions
          December 31, in which case the final return is due six    for the year.
          months after the date of death. For more
                                                                    If the situation just described does not apply, you must
          information, see Guide T4011, Preparing Returns for
                                                                    continue to deduct CPP/QPP, EI, and PPIP. You cannot
          Deceased Persons.
                                                                    take into consideration any deductions taken by the
      ■   Close the business number and all CRA business            previous employer.
          accounts after all the final returns and all the
                                                                    As stated in the previous section called “If your business
          amounts owing have been processed.
                                                                    stops operating or the partner or proprietor dies,” the
  To close your payroll program account, you can use the            predecessor company has to do all of the following:
  “Request to close payroll account” service in
                                                                        ■    send their final remittances to the CRA
  My Business Account at canada.ca/my-cra-business
  -account. An authorized representative can use this                   ■    calculate any pension adjustment
  service through Represent a Client at canada.ca/taxes
  -representatives.                                                     ■    fill out and file all slips and summaries

To find out how to fill out and file the T4 or T4A slips and            ■    give employees their copies of T4 or T4A slips
Summary, you can do one of the following:                               ■    issue a ROE to their employees
      ■   go to canada.ca/payroll                                       ■    deregister their business number
      ■   go to canada.ca/en/revenue-agency/services/tax                ■    close all program accounts
          /businesses/topics/payroll/learn-about-payroll
          -using-multimedia                                         For more information about legal status, restructure, or
                                                                    reorganization, go to canada.ca/cpp-ei-explained and select
      ■   see Guide RC4120, Employers’ Guide – Filing the           “Employer restructuring/Succession of employers.”
          T4 Slip and Summary
      ■   see Guide RC4157, Deducting Income Tax on                 If your business amalgamates
          Pension and Other Income, and Filing the T4A Slip         If your business amalgamates with another, special rules
          and Summary                                               apply. In this case, you, as the successor employer, can keep
                                                                    the business number (BN) of one of the corporations, or you
If you change your legal status, restructure,                       can apply for a new one. If one of the corporations is
or reorganize                                                       non-resident, however, you have to apply for a new BN.
If you change your legal status, restructure, or reorganize,        Since no new employer exists for CPP and EI purposes,
we consider you to be a new employer. You may need a                continue deducting normally, taking into account the
new business number (BN) and a new payroll program                  deductions and remittances that occurred before the
account. Call 1-800-959-5525 to let us know if your business        amalgamation. These remittances will be reported under
status has changed or will change in the near future.               the payroll program account of the successor BN.
     Note                                                           If you had previously been granted a reduced employer’s
     Amalgamations have different rules. For more                   EI premium rate, you will need to contact Employment and
     information, see the next section “If your business            Social Development Canada to make sure you are still
     amalgamates.”                                                  eligible for the reduced rate.
The following are examples of changes to a business status:         With an amalgamation, the predecessor corporations do not
                                                                    have to file T4 returns for the period leading up to the
      ■   You are the sole proprietor of a business and you
                                                                    amalgamation. The successor corporation files the
          decide to incorporate.
                                                                    T4 returns for the entire year.
      ■   You and a partner own a business. Your partner
          leaves the business and sells their half interest to      Filing information returns
          you, making you a sole proprietor.
                                                                    You have to file a T4 or T4A information return, as
      ■   A corporation sells its property division to another      applicable, and give information slips to your employees
          corporation.                                              each year, on or before the last day of February of the
      ■   One corporation transfers all of its employees to         following calendar year that the information return
          another corporation.                                      applies to. If the last day of February is a Saturday or a
                                                                    Sunday, your information return is due the next business
When a change happens, a new (successor) employer is                day.
created. A successor employer who has acquired all or part
of a business, and who has immediately succeeded the                For information on how to report the employees’ income
former (predecessor) employer as the new employer of an             and deductions on the appropriate slips and summary,
employee, may, under certain circumstances, take into               go to canada.ca/taxes-slips or see Guide RC4120,
consideration the CPP/QPP, EI, and PPIP deductions                  Employers’ Guide – Filing the T4 Slip and Summary, or
already withheld by the previous employer and continue              Guide RC4157, Deducting Income Tax on Pension and
withholding and remitting those deductions as if there              Other Income, and Filing the T4A Slip and Summary.
were no change in employer. If employees have already

12                                                         canada.ca/taxes
Penalties, interest, and other                                The penalties are as follows:
consequences                                                        ■   3% if the amount is one to three days late
Failure to deduct                                                   ■   5% if it is four or five days late
If you fail to deduct the required CPP contributions or             ■   7% if it is six or seven days late
EI premiums from the amounts you pay your employee,
you are responsible for these amounts even if you cannot            ■   10% if it is more than seven days late, or if no
recover the amounts from the employee. We will assess you               amount is remitted
for both the employer’s share and the employee’s share of     Generally, we only apply this penalty to the part of the
any contributions and premiums owing. We will also assess     amount you failed to remit that is more than $500.
a penalty and interest as described below. For more           However, we will apply the penalty to the total amount if
information, see “Recovering CPP contributions” on            the failure was made knowingly or under circumstances of
page 20 and “Recovering EI premiums” on page 25.              gross negligence.
If you failed to deduct the required amount of income tax     In addition, if you are assessed this penalty more than once
from the amounts you pay your employee, you may be            in a calendar year, we will assess a 20% penalty on the
assessed a penalty as described below. As soon as you         second or later failures if they were made knowingly or
realize you did not deduct the proper amount of income        under circumstances of gross negligence.
tax, you should let your employee know. Your employee
can either pay the amount when they file their income tax       Note
and benefit return or they can ask you to deduct more           We will charge you a fee for any payment that your
income tax at source. For more information, see “Request        financial institution refuses to process. If your payment
for more tax deductions from employment income” on              is late, we can also charge you a penalty and interest on
page 29.                                                        any amount you owe.

Penalty for failure to deduct                                 Interest
We can assess a penalty of 10% of the amount of CPP, EI,      If you do not pay an amount that is due, the CRA may
and income tax you did not deduct.                            apply interest from the day your payment was due.
                                                              The CRA sets the interest rate every three months, based on
If you are assessed this penalty more than once in a          prescribed interest rates. Interest is compounded daily.
calendar year, we will apply a 20% penalty to the second or   The CRA also applies interest to unpaid penalties. For
later failures if they were made knowingly or under           the prescribed interest rates, go to canada.ca/taxes-interest
circumstances of gross negligence.                            -rates.

Failure to remit amounts deducted                             For due dates, see pages 4 and 49.
When you deduct CPP contributions, EI premiums or
income tax from the amounts you pay to your employee or       Summary convictions
other individual, you have to remit them to the Receiver      If you do not comply with the deducting, remitting, and
General for Canada as discussed in Chapter 8. Also, you       reporting requirements, you may be prosecuted. You could
have to include your share of CPP contributions and           be fined from $1,000 to $25,000, or you could be fined and
EI premiums when you remit.                                   imprisoned for a term of up to 12 months.
We will assess you for both the employer’s share and the
employee’s share of any CPP contributions and                 Director’s liability
EI premiums that you deducted but did not remit. We will      If a corporation (including for-profit or non-profit) does not
also assess a penalty and interest as described below.        deduct, remit, or pay amounts held in trust for the
                                                              Receiver General (CPP, EI, and income tax), the directors of
Penalty for failure to remit and remitting late               the corporation at the time of the failure are jointly and
                                                              severally, or solidarily, liable along with the corporation,
We can assess a penalty when either of the following          to pay the amount due. This amount includes penalties and
applies:                                                      interest.
    ■   you deduct the amounts, but do not send them to us    However, if the directors take action to ensure the
    ■   you deduct the amounts, but send them to us late      corporation makes the necessary deductions or remittances,
                                                              we will not hold the directors personally responsible. For
Payments made on the due date but not at a financial          more information, see Information Circular IC89-2,
institution can be charged a penalty of 3% of the amount      Directors’ Liability.
due. For more information, see “Threshold 2” on page 51.
When the due date falls on a Saturday, a Sunday, or a         Cancel or waive penalties or interest
public holiday recognized by the Canada Revenue Agency,       The CRA administers legislation, commonly called the
we consider your payment to be on time if we receive it on    taxpayer relief provisions, that allows the CRA discretion to
the next business day.                                        cancel or waive penalties or interest when taxpayers cannot
                                                              meet their tax obligations due to circumstances beyond
                                                              their control.

                                                  canada.ca/taxes                                                          13
The CRA’s discretion to grant relief is limited to any period        ■    Use Form CPT101, Appeal of an Assessment Under
that ended within 10 calendar years before the year in                    the Canada Pension Plan and/or Employment
which a request is made.                                                  Insurance Act, to appeal a payroll deductions
                                                                          assessment.
For penalties, the CRA will consider your request only if it
relates to a tax year or fiscal period ending in any of the 10       ■    Write to the chief of appeals at:
calendar years before the year in which you make your
                                                                 CPP/EI Appeals Division
request. For example, your request made in 2020 must
                                                                 Canada Revenue Agency
relate to a penalty for a tax year or fiscal period ending in
                                                                 451 Talbot Street
2010 or later.
                                                                 London ON N6A 5E5
For interest on a balance owing for any tax year or fiscal
                                                                 Explain why you do not agree with the ruling or payroll
period, the CRA will consider only the amounts that
                                                                 deductions assessment and provide all relevant facts.
accrued during the 10 calendar years before the year in
                                                                 Include a copy of the CPP/EI ruling letter or payroll notice
which you make your request. For example, your request
                                                                 of assessment.
made in 2020 must relate to interest that accrued in 2010 or
later.                                                           For more information on how to appeal a payroll
                                                                 deductions assessment of income tax, see Publication P148,
To make a request, fill out Form RC4288, Request for
                                                                 Resolving Your Dispute: Objection and Appeal Rights
Taxpayer Relief – Cancel or Waive Penalties or Interest. For
                                                                 Under the Income Tax Act.
more information about relief from penalties or interest and
how to submit your request, go to canada.ca/taxpayer             For more information on how to appeal a CPP/EI ruling
-relief.                                                         decision or a payroll deductions assessment of CPP or EI,
                                                                 see Guide P133, Your Appeal Rights – Canada Pension Plan
How to appeal a payroll assessment or                            and Employment Insurance Coverage.

a CPP/EI ruling
If you receive a payroll assessment because your payment
                                                                 Chapter 2 – Canada Pension Plan
was not applied to your account correctly, before you file       contributions
an appeal, we recommend that you call Business Enquiries
at 1-800-959-5525 or write to your National Verification and     For Canada Pension Plan (CPP), contributions are not
Collection Centre (NVCC) to discuss it. Many disputes are        calculated from the first dollar of pensionable earnings.
resolved this way and can save you the time and trouble of       Instead, they are calculated using the amount of
appealing.                                                       pensionable earnings minus an exempt amount that is
                                                                 based on the period of employment.
If you do not agree with a payroll assessment for CPP
contributions, EI premiums, or income tax, or you have           As of 2019, the Canada Pension Plan is being enhanced over
received a CPP/EI ruling letter and you disagree with the        a 7-year phase-in. For more information, go to canada.ca
decision, you have 90 days after the date of the notice of       /en/services/benefits/publicpensions/cpp/cpp-enhancement.
assessment or notification of the ruling to appeal.
To appeal a CPP/EI ruling decision or payroll deductions         Impact of contribution errors
assessment, you can choose one of the following:                 If used improperly, some payroll software programs,
     ■   Access My Business Account at canada.ca/my-cra          in-house payroll programs, and bookkeeping methods can
         -business-account, if you are a business owner, and     calculate unwarranted or incorrect refunds of
         select “Register a formal dispute (Appeal)” for your    CPP contributions for both employees and employers.
         payroll program account.                                The improper calculations treat all employment as if it were
                                                                 full-year employment, which incorrectly reduces both the
     ■   Access Represent a Client at canada.ca/taxes            employee’s and employer’s contributions.
         -representatives. If you represent a business, select
         “Register a formal dispute (Appeal)” for a payroll      For example, when a part-year employee does not qualify
         program account. If you represent an individual,        for the full annual exemption, a program may indicate that
         select “Register my formal dispute,” and then select    the employer should report a CPP overdeduction in box 22,
         “CPP/EI ruling” in the subject area.                    “Income tax deducted,” of the T4 slip. This may result in an
                                                                 unwarranted refund of tax to the employee when the
     ■   Access My Account at canada.ca/my-cra-account, if       employee files their income tax and benefit return.
         you are an individual, select “Register my formal
         dispute,” and select “CPP/EI ruling” in the subject     When employees receive refunds for CPP overdeductions,
         area.                                                   their pensionable service is adversely affected. This could
                                                                 affect their CPP income when they retire. In addition,
     ■   Use Form T400A, Objection – Income Tax Act              employers who report such overdeductions receive a credit
         (income tax only).                                      they are not entitled to because the employee worked for
     ■   Use Form CPT100, Appeal of a Ruling Under the           them for less than 12 months.
         Canada Pension Plan and/or Employment Insurance
         Act, to appeal a CPP/EI ruling.

14                                                      canada.ca/taxes
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