Area of Law: Tax Law
Answer # 195
Employers' responsibilities for payroll taxesRegion: Ontario Answer # 195
If you are an employer, you normally have four main tax obligations. You are usually required to:
- Collect and remit deductions from your employees’ paycheques,
- Make contributions in addition to employee deductions,
- Report employee earnings, and
- Pay tax on the income you earn.
Employee taxes to be deducted from payroll
Employers are required to deduct income tax, Canada Pension Plan (CPP) contributions, and Employment Insurance premiums from an employee’s paycheque. Employers are also required to contribute an amount in addition to the employee’s contribution to CPP and Employment Insurance. For CPP contributions the employer matches the amount deducted from the employee’s paycheque. For Employment Insurance, the employer contributes slightly more than the employee.
Deduction and employer contribution amounts
The amount of employee deductions and employer contributions will depend on the employee’s income. To find out how much you have to deduct or contribute you can call Canada Revenue Agency or visit them online to get a copy of the Payroll Deduction Tables. CRA also provides various forms that you and the employee will need to fill out before the employee is paid for the first time.
An employer is required to fill out special forms when reporting employee earnings. To report salaries, wages and taxable benefits, an employer is required to fill out a T4 form and give the employee their copy by the end of February of the following year. To obtain these forms and for more information call CRA.
Most employers are also responsible for paying the Employer Health Tax (EHT) and Workplace Safety and Insurance premiums, which are calculated as a percentage of the business’s total payroll expense and are administered by provincial government offices. If you are starting a new business or hiring new employees for the first time, you should contact the Employer Health Tax Branch in your area and the Workplace Safety and Insurance Board (WSIB) to register your business and to find out how much tax you will have to pay.
Deadlines for remitting employee income tax deductions
There are deadlines for remitting income tax deducted from employee paycheques. Generally, the deadline is the 15th day of the following month or penalties may apply. If the 15th day falls on a Saturday, Sunday, or holiday, payment is due by the next business day after the 15th. Some small business employers may be allowed to remit deductions on a quarterly basis. CRA will automatically notify you if you qualify for this program.
For general information, contact Canada Revenue Agency.
For legal advice and assistance with tax planning, a CRA tax dispute, or other tax issues, contact Tax Chambers LLP
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