Are you confused about how to do payroll in Canada? Then don’t be. Because we totally understand that you want to run payroll successfully. Setting up payroll in Canada is a critical aspect of your business, especially if you’re an employer. So you need to be well-versed in it. For this purpose, you need to know authentic information about payroll. If you are an employer and having trouble with payroll, this article will walk you through how to do payroll in Canada step-by-step.
Having a good payroll system is essential for your business. It’s the backbone of your company, which helps you track all the transactions and income. This can be done by keeping your records in order. For this purpose, you can hire our expert payroll administrator in Mississauga. Because Yogi & Associates provides excellent payroll services in Mississauga and its surrounding areas in Ontario. And this article is a comprehensive guide to help you understand how to do payroll in Canada. Let’s give it a read!
There are five steps to processing payroll in Canada for employers:
- A payroll account should be opened and used with the CRA.
- Ask workers for the necessary data, such as their social insurance number (SIN) and a finished TD1 form from the federal and provincial governments.
- Generating the proper Canadian payroll withholding from employees’ paychecks each pay period.
- Send these payroll deductions and the employer’s portion of benefit programs to the CRA as needed.
- Submitting an information return by the last day of February of the following calendar year, detailing each employee’s income and deductions on the proper T4 or T4A slip.
Let’s examine each of these actions in more detail.
1. Establish a Payroll Account
The first step for running payroll in Canada is to open your payroll account. Simply put, you can use your payroll account to remit payroll deductions to the Canada Revenue Agency. If you own a business number (BN), you can add a payroll deduction account to your other registered program accounts, such as GST/HST. However, there are three ways to get in touch with CRA if you want to register for a business number:
2. Gather the Required Data From Employees
Check each new employee’s SIN card when you hire them. The employee’s name and SIN should also be entered exactly as they appear on the card. Additionally, verify the social security numbers that begin with the digit “9”. The reason is that this number indicates someone who is neither a Canadian citizen nor a permanent resident. He or she is only permitted to work up until the date stated on the document that Immigration, Refugees and Citizenship Canada provided to them.
Furthermore, the proper Form TD1 for the federal and provincial governments must be completed by your new employee. Because the tax deduction amount from an individual’s job income is determined by this form.
3. Perform the Necessary Payroll Deductions
Including any taxable benefits to your employees’ salaries is crucial before you make any deductions. Also, ask yourself, do I offer a worker boarding and accommodation, access to a corporate car, parking, or a low-interest loan? The term “taxable benefit” refers to everything you give an employee and their wages.
Each pay period, you should add any taxable benefits an employee receives to their basic pay before making any payroll deductions. As a result, the total income displays the total amount subject to deductions for income tax, EI premiums, and CPP contributions.
“As an employer, you are required to remit your portion of the CPP and EI premiums as well as the income tax withheld from the wages of your employees.” – CRA
After recording all taxable wages and benefits, you are free to make payroll deductions. Moreover, employers should also make more deductions from employees’ salaries. These are as follows:
- Canada Pension Plan (CPP)
- Employment Insurance (EI)
- Income Tax
Remember: Your company can have some specific employee deductions. For instance, health benefits, insurance, and retirement programs.
4. Submit Deductions to the CRA
When you remit deductions to the Canada Revenue Agency, you need the following things to make a payment (remittance):
- The payroll account number
- Your remittance of the paydays
- The end date of your remitting timeline.
- The gross payroll in the remitting period
- The number of employees who got salaries on the last payday in the remitting period.
- Your remitter type and frequency
- Remittance deadline
Additionally, you can send payroll deductions electronically or via paper remittance vouchers. Email-based account statements are also available. Additionally, if you make payments online, you can access your online My Business Account to examine your statements and transactions.
Point to ponder! 💭
Regular remitters, such as new employers or ROE, must remit their deductions to the CRA by the 15th day of the month following the month they were made. After building up a remittance history, you might then be classed as a quarterly or accelerated remitter. So, you’ll have to do less paperwork.
If you need more details about Record of Employment ROE, please visit our blog by clicking here, The Rich Guide to ROE in 2022
5. Complete all T4 Slips and Information Returns.
Finally, you must complete a T4 slip for each employee as an employer each year. Additionally, you must complete the T4 summary form. Likewise, keeping in mind the calendar year to which the information return relates, you must file the T4 information return and distribute the T4 slips to the employees on or before the last day of February.
To file your T4 slips electronically using the CRA’s T4 web forms application, please see the CRA’s T4 – Information for Employers page. This way, you can file up to 100 original, additional, canceled, or amended T4 slips.
Payroll in Canada: The Bottom Line!
In Canada, businesses are subject to various forms of tax. However, managing records is a little difficult task. But it’s better to be prepared than face a CRA audit, where the CRA will look at these records to determine your tax obligations. And could charge penalties if they find that the records are not complete. Therefore, make sure you are running payroll in Canada correctly.
Doing payroll is not difficult if you have the right guidance and instructions from professionals. For this purpose, you can hire an expert bookkeeper from Yogi & Associates, a well-established taxation firm in Mississauga, Ontario. We have a lot of experience in doing payroll in Canada. And we will provide you expert guidance, so you can easily manage your payroll in Canada. Don’t hesitate to contact us and get our bookkeeping services in Mississauga at reasonable rates.