All employers are required to deduct from the paycheques of their employees a percentage of the income earned as payroll remittances, plus an amount for Employment Insurance (EI) and Canada Pension Plan (CPP). In additions to the EI and CPP withholding from employees paycheques, the employer is obligated to contribute an amount for EI and CPP as well. At the end of the year there is an obligation to issue T4 slips to the employees and to file a T4 Summary with CRA.
FAQs
In Canada, calculating payroll involves identifying and determining gross pay. This is then followed by subtracting any deductions and payroll taxes to help you arrive at net pay. When used correctly, a payroll calculator can ensure no mistakes in net pay that you issue to your staff or taxes paid to the CRA. Consult a professional tax lawyer in your area.
Payroll deduction amounts depend on the province of employment. However, all Canadian employers are responsible for deducting the amounts of the Canada Pension Plan contribution, the Employment Insurance premium, federal income tax, and provincial income tax.
If you receive employment income or any other type of income, your employer or payer will deduct income tax at source from the amount paid. If you expect to be making less than the total claim amount indicated on Form TD1 for an entire year, you can ask your employer or payer to not make any deductions.
Pro Tip
CRA Tax Audits
There are over 350,000 tax audit and review actions conducted by the Canada Revenue Agency on a yearly basis. Around 15,000 of these tax audits deal with “cash only” businesses (i.e. the underground economy). Additionally, an estimated 35,000 are tax shelter audits.
