What does CRA require of an employer?
If you are a business owner and have employees, you know the challenges that can come with managing people. Hiring the right people, maintaining schedules, workloads, employment standards, and conflict resolution can be challenging and unpredictable. But making sure you are onside with Canada Revenue Agency’s (CRA) employer responsibilities doesn’t have to be.
Let’s break this down into three sections: Set up, process and report:
1. Set up:
You must have a payroll account registered with CRA and you can do this online using CRA online account registration.
Once you have the right candidate for your business you must get them to complete and sign a current TD1 form, both a federal and a provincial form. The TD1 tells you, as an employer, how much tax you are required to deduct from their payroll. It will also provide you with their Social Insurance Number which an employer is required to have before paying an employee.
As part of the employee hiring process, you will have determined what their pay will be.
- Are they paid hourly, paid salary, paid by commissions?
- Do they have any taxable benefits that you need to include in their gross income?
In order to process the payroll, you will have to determine what amount needs to be recorded as gross income per pay period for the employee.
How do you determine gross income?
Using the gross income from above, you must now calculate and withhold the CPP, EI and income tax from your employee’s cheque and hold in trust for the government until you make your source deduction remittance. You can use the payroll features of accounting software if you are using that or you can use the Payroll Deductions Online Calculator found online at CRA.
Once you have calculated the deductions, you are ready to pay your employee and provide them with a paystub so they can see how their payroll was calculated.
Remit your source deductions according to the dates prescribed for your company by CRA. Most small businesses have to remit by the 15th of the following month but as your payroll gets larger, you may have different remittance dates.
Don’t forget to include your employer portion as part of the money you remit to CRA!
All of your Company’s payroll from January 1st to December 31st needs to be reported annually on a T4 Statement of Remuneration slip. You must provide a copy to the employee and file a copy with Canada Revenue Agency by February 28th each year.
Another reporting requirement you have as an employer is when an employee is no longer with your company, for whatever reason. Whenever this happens you must file a Record of Employment (ROE) with Service Canada. Your ROE could be due within 5 calendar days of the interruption of employment so make sure you check out the government website for more Information on ROE.
Feel free to call me if you need assistance on ensuring you are meeting your employer responsibilities with Canada Revenue Agency.
Bobi-Rae Miller has been working in public practice since 2000 and received her professional accounting designation in 2005. She focuses on working with small to medium-sized businesses and feels it is important for business owners to understand the financial side of their operations, so she takes the time to ensure that this happens.