How to Remit Payroll Deductions Correctly

The money withheld from an employee’s paycheck is not business income. It is held in trust for the Canada Revenue Agency (CRA). Knowing how to remit payroll deductions correctly protects your business from interest, penalties, and the stress of finding out that your payroll records do not match your CRA account.

For Ontario employers, payroll remittances usually include federal and provincial income tax withheld, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums. You must also include the employer’s required CPP and EI contributions. The key is to calculate the full amount for each pay period, keep it separate from operating cash, and send it by your assigned due date.

What You Need to Remit

Each time you run payroll, record the deductions taken from the employee’s gross pay. These generally include income tax, CPP, and EI. Your business then adds its employer share of CPP and EI before making the remittance.

The amount sent to the CRA is not limited to what came off the employee’s paycheck. For example, if you withhold CPP and EI, your company generally contributes matching CPP amounts and pays EI at the employer rate. Those employer amounts are part of your payroll cost and part of the total remittance due.

Before your first payment, make sure you have a CRA payroll program account. This account is connected to your business number and is typically identified with an RP program account number. Use the correct account number whenever you make a payment so the CRA applies it to payroll rather than another tax obligation.

How to Remit Payroll Deductions Step by Step

Start with a completed payroll register for each pay period. It should show every employee’s gross earnings, taxable benefits, income tax withheld, CPP deductions, EI deductions, net pay, and the employer contributions owed. Payroll software can calculate these figures, but the employer remains responsible for confirming that the information is accurate.

Next, add together the employee deductions and employer contributions. This is your remittance amount. Reconcile it to your payroll records before paying. A simple review can catch common problems, such as an employee being paid twice, a taxable benefit being missed, or an employer contribution being excluded from the total.

Then submit the payment through an approved CRA payment option. Many businesses use online banking and select the payroll deductions payment option. Depending on your bank and business setup, you may also be able to pay through the CRA’s online services, pre-authorized debit, or another approved electronic method. Keep the confirmation number, payment receipt, or bank record with your payroll file.

Finally, check your CRA payroll account after the payment has had time to process. The payment should appear against the correct payroll period and account. This habit is especially helpful for new employers, businesses with more than one program account, and companies that have recently changed banks or payroll providers.

Know Your CRA Remittance Schedule

Your due date depends on the remitter type assigned to your business by the CRA. Do not assume that every employer has the same deadline. Missing a deadline can result in penalties even when the amount is correct.

Most new or regular remitters pay monthly. For this schedule, deductions made during one month are generally due by the 15th day of the following month. For example, payroll deductions from March are generally due by April 15.

Some employers are required to remit more often. Threshold 1 accelerated remitters generally pay twice a month, while Threshold 2 accelerated remitters generally pay up to four times per month. Eligible quarterly remitters have a different schedule and typically remit by the 15th day of the month after each quarter ends.

Your remitter type is based largely on your average monthly withholding amount and CRA requirements. It can change as your payroll grows. Review notices from the CRA and confirm your current schedule rather than relying on last year’s process. If a due date falls on a weekend or public holiday, payment rules may allow the next business day, but it is safer to schedule payments early.

Keep Payroll Funds Separate From Cash Flow

Late remittances often happen because payroll deductions are left in the general operating account and used to cover rent, inventory, or an unexpected expense. That creates a cash flow problem quickly because the business still owes the full payroll amount, plus potential interest and penalties.

A practical approach is to move payroll deductions and employer contributions into a separate savings account as soon as payroll is processed. The account does not need to be complicated. Its purpose is to make sure money owed to the CRA is available when the remittance date arrives.

For businesses with weekly or biweekly payroll, setting aside funds every pay run also makes monthly remittances far easier to manage. You will not need to find a large lump sum at the end of the month.

Avoid These Common Payroll Remittance Errors

The most common mistake is paying the right amount late. CRA penalties can apply when a remittance is overdue, and repeated late payments can become expensive. Set calendar reminders several business days before the deadline, not on the deadline itself.

Another issue is sending the payment to the wrong account or using an incorrect business number. The money may leave your bank account, but your CRA payroll account can still show a balance owing until the payment is traced and reassigned.

Employers also sometimes remit only employee deductions and forget employer CPP and EI contributions. This creates an underpayment. Your payroll register should clearly separate employee withholdings from employer costs, then show the combined amount due to the CRA.

Classification errors can cause problems as well. A worker who is treated as an independent contractor may later be considered an employee based on the actual working relationship. If that happens, the business may face unpaid payroll deductions and related costs. When the arrangement is unclear, get professional advice before deciding how to pay the worker.

Your Remittance Is Only One Part of Payroll Compliance

Making payments on time is essential, but it is not the entire payroll process. Your deductions must be calculated correctly from the start. That means using current payroll tables, applying tax credits and TD1 information appropriately, tracking taxable benefits, and maintaining complete records.

At year-end, your payroll records support T4 slips and the T4 Summary. The amounts reported on those forms should agree with the payroll deductions remitted throughout the year. If they do not, investigate the difference before filing. A mismatch may point to a missed payment, a payroll adjustment, an incorrect employee record, or a payment applied to the wrong period.

Keep payroll records, remittance confirmations, employee forms, and supporting documents organized. Good records make it easier to answer CRA questions, correct errors promptly, and understand your true labor costs.

When to Get Payroll Support

Payroll can become more complex when you hire your first employee, add benefits, issue bonuses, employ family members, or manage workers with different schedules. Growth is positive, but it also increases the chance of an avoidable error.

A professional payroll service can calculate deductions, prepare pay runs, track deadlines, and help reconcile your payroll account. The right support does not remove your responsibility as an employer, but it gives you a clearer process and more confidence that your payments and reporting are being handled accurately.

Ayad Accounting helps Ontario businesses manage payroll administration with reliable, practical support. Whether you are paying one employee or building a growing team, a consistent payroll routine lets you focus on running the business while keeping your CRA obligations organized and on time.

Treat every payroll remittance as a scheduled business commitment, not an end-of-month task to handle when time allows. A clean payroll process protects your employees, your cash flow, and the business you are working hard to build.