As an employer, you have a long list of obligations to your employees. This includes payroll, which is essential to them, to you, and to the Canadian government.
You have four main responsibilities related to payroll aside from paying your employees. There are deductions you have to take out of your employees’ paychecks and remit to the CRA. These include taxes on your and your employees’ earnings.
Unfortunately, many business owners make the mistake of failing to fulfill these obligations or doing them incorrectly. There can be plenty of consequences in such cases. Here are the common issues you need to get out of.
#1 Failing to deduct the required tax
You need to deduct a required amount of tax from your employees’ paychecks depending on how much they are paid. Otherwise, the CRA may charge a penalty of at least 10% of the amount of tax that should have been deducted.
There are ways out of this problem, though, but you need to do them as soon as you realize your error. The first thing you can do is tell your employee about what happened. That way, they can pay the required amount when it is time to file income taxes and benefit returns. You can also just take out more tax at source as a workaround.
#2 Remitting late or failing to remit altogether
Payroll deductions do not only have to be done correctly but also remitted properly and on time. Otherwise, the CRA will charge you at least 3% of the amount in question. This percentage can go up to 20% depending on how many days you are late (or if you did not remit at all) and how many times you have committed the same error in the current calendar year.
You can bookmark this page on the CRA website to check when your remittance due date is. When remitting payments and your due date happens to fall on a weekend or a CRA-recognized public holiday, the last day you can remit without being late is the business day right after the exact due date.
#3 Failing to file information returns on time
To the CRA, each slip is an information return, and you are penalized separately for each information return that is filed late. The penalty is at least $100, and it can increase depending on how many information returns are late and the number of days they are late.
If you have 50 employees or less, your maximum penalty is $1,000. However, if you have a large business that employs more than 10,000 people, that penalty can be as high as $7,500.
Avoid this problem by filing your information returns on time. You can check the due date here.
Payroll can be a very mundane task, but it involves tasks that can get you in trouble if not done right and on time. The key to avoiding these issues is looking up the right resources and keeping everything organized. Keep your employees and your obligations to the CRA covered, and your business will not be in any trouble.