The Canada Revenue Agency (CRA) requires all employers and other people in the country that make employment-related payments to register for a payroll account and follow the payroll requirements. The CRA defines an employer as anyone that pays salaries, wages, bonuses, or tips to workers. CRA’s definition of an employer also includes anyone that provides certain taxable benefits to employees. Payments made to domestic helpers such as full-time nanny is also a taxable benefit.
As mentioned above, the CRA requires everyone who makes employment-related payments to register for a payroll account. These people include administrators, trustees, corporate directors, liquidators, and estate executors. Payments made by these people include fees or amounts for services, pension or superannuation, educational assistance payments, lump-sum payments, accumulated income payments, self-employed commissions, patronage allowances, annuities, and retiring allowances.
From the payments mentioned above, all the people that the CRA requires to register for a payroll account need to make some deductions such as federal and provincial/territorial taxes, Employment Insurance (EI), or Canada Pension Plan (CPP) deductions. The tax deductions can include federal, provincial, and territorial income tax deductions. Previously, making these deductions was complex. However, a payroll calculator for Canada is making things easier.
Employer Payroll Requirements in Canada
One of the primary responsibilities of any employer is to make accurate payments to employees. For Canadian employers, this would mean complying with the payroll requirements of the CRA. The main payroll requirement that the CRA expects employers to fulfill is that they remit the correct payroll deductions. For this reason, a CRA payroll deductions calculator has been introduced. Based on the requirements of the CRA, employers in Canada need to run payroll in the following way:
- Register and operate a payroll account with the CRA
- Get the required information from employees. This includes a completed federal and provincial TD1 form and social insurance number (SIN). Following is an image of a sample TD1 form that has been filled.
- Make the correct payroll deductions from employees’ pay during each pay period. This can be done with a payroll deductions calculator, such as the CRA payroll calculator.
- Submit to the CRA the calculated payroll deductions along with the EI premiums and CPP contributions
- Report the income and deductions of employees on the relevant T4 or T4A slip. Also, file an information return on or before the last day of February of the following calendar year. The information returns need to be filed online. More information can be found here.
These are the steps that employers and other people that make employment-related payments need to follow to comply with the requirements of the Canada Revenue Agency (CRA) for payroll.
How a Payroll Calculator for Canada Can Benefit Employers
As mentioned above, the CRA requires employers in Canada to make correct payroll deductions from the pay of employees during each pay period. A payroll calculator can help with this by enabling employers to work out all the deductions that they need to include on their official statement of earnings.
While the calculator is designed to make accurate calculations, the reliability of the calculations will depend on how accurate the information you’ve provided is. In addition to making deductions from the pay of your employees during each pay period, you need to deduct the taxable benefits you give to your employees as well. This can include a low-interest loan, dedicated parking, or company-maintained car. These taxable benefits need to be added to your employees’ income before making payroll deductions.
Another critical thing to keep in mind is that, just like any other income, the taxable benefit may be subject to EI premiums, CPP contributions, and income tax deductions. The value of the taxable benefits and which taxable benefits are subject to HST/GST is provided in the T4130 Employers’ Guide – Taxable Benefits and Allowances. Once you have gone through this guide, you should be ready to make deductions using a payroll deductions calculator. Following is how you need to calculate these deductions.
Calculating Income Tax Deductions
Before you start using the payroll calculator for Canada, you need to look up the provincial or territorial tables for your region to determine how much you need to deduct from the pay of your employees. Once you do this, it will be easy to calculate your income tax deductions.
Calculating CPP Contributions
Employers will need to deduct CPP contributions from the pay of any employee who is older than 18 and younger than 75. The only circumstances that exempt an employee from these deductions is if they are disabled, or in pensionable employment. The rates at which the CPP contributions need to be deducted can be found here. Once you have this information, you can calculate the CPP contributions to deduct.
Calculating EI Premiums
Finally, employers need to deduct EI premiums from the pay of employees on every dollar of earnings that are insured up to the yearly maximum. EI deductions can be determined by referring to EI premium rates and maximums chart. The calculations can be made using a CRA payroll calculator.
As mentioned above, all employers in Canada must make payroll deductions. This is needed to comply with the payroll requirements of the Canada Revenue Agency (CRA). The good news is that payroll deductions can be easily calculated by employers using a payroll calculator for Canada.