If you own or manage a business in Canada, you already know payroll is not optional. You pay your employees, withhold CPP, EI and income tax, and you must remit it to the Canada Revenue Agency (CRA). It seems straightforward until it is not.
Payroll deductions are considered trust funds. This is not your money. You are holding it in trust for the government. If you fail to remit it correctly or on time, the CRA treats it very seriously.
In my eleven years at the CRA, I dealt with payroll audits, payroll compliance, and collections across thousands of businesses. I can tell you this:
Payroll is the number one area you cannot afford to get wrong.
What Happens If You Miss or Delay Payroll Remittances
When you deduct money from your employees’ pay, you are required to send it to the CRA by the due date. Miss the deadline and here is what can happen.
Penalties
- 3% if you are one to three days late
- 5% if you are four to five days late
- 7% if you are six to seven days late
- 10% if you are more than seven days late or do not remit at all
If the CRA determines the late or missing remittance was done knowingly or with gross negligence, the penalty can double to 20%. If they see a pattern and you’re chronically non-compliant, they can tack on a 50% Gross Negligence penalty.
Interest
The CRA charges daily compounding interest on top of penalties and it continues until the balance is paid in full.
Criminal Charges
Failing to deduct, remit, or file as required can lead to fines up to $25,000 or even imprisonment for up to (12) twelve months. It does not happen often, but it is a legal option the CRA can use for serious or repeated failures. Plus, you wind up being featured on their criminal conviction website.
Why Payroll Deductions Are Trust Funds
Source deductions such as income tax, CPP, and EI are not company funds. The CRA considers them held in trust for the Crown.
When a business fails to remit, the CRA can collect these amounts the same way they collect any tax debt. That can include bank freezes, garnishments, liens, or seizures.
It gets more serious. The CRA can also pursue directors personally.
Director’s Liability
Corporate directors can be held personally responsible for unremitted source deductions. That means your personal assets can be at risk if the CRA cannot collect from the company.
The CRA must show they attempted to collect from the company first and they must assess directors within two years of leaving office.
Even with these rules, directors who do not exercise proper oversight and due diligence can still be held personally liable. This is not something to gamble on.
Why You Should Work with a Payroll Expert
Payroll errors often happen because of timing issues, missing deposits, software errors, or because business owners have too many responsibilities.
That is where we come in. At inTAXicating, we work with Canadian business owners to make sure payroll is done right. We help you get your payroll fully compliant with CRA rules, make sure source deductions are correct and remitted on time, and guide you through the whole process so you and your directors are protected.
Working with payroll experts ensures you:
- Stay compliant with CRA rules and deadlines
- Avoid penalties and interest on late remittances
- Reduce personal risk as a director
- Have accurate records ready if CRA ever asks
- Can focus on growing your business without payroll headaches
Real Experience Matters
In my time at the CRA, I saw businesses shocked by how quickly small mistakes with payroll could spiral into significant debts. Employees’ deductions were withheld but not remitted. Filing deadlines were missed. Directors assumed their accountant handled everything. The CRA did not care. They just wanted the money plus penalties and interest.
Payroll is one area you cannot afford to guess on. You need professional guidance, experience, and someone who understands how the CRA actually handles these issues.
What to Do Next
If you are behind on payroll remittances, want to make sure your business is fully compliant,or you’re looking for a better way to handle your payroll, then contact us. We work with business owners across Canada to evaluate their payroll, clean up past issues, and connect them with reputable payroll providers if needed.
inTAXicating – For a free 15 minute consultation, contact us at any of the options below:
intaxicatingtaxservices@gmail.com
416.833.1581