Do you know your federal remitting rules?

Quiz yourself with these true and false statements on the CRA’s regulations

Payroll is a challenging job with many responsibilities. In addition to paying employees, filing year-end returns, and preparing Records of Employment, many payroll professionals are also tasked with sending the Canada Revenue Agency (CRA) their employer’s source deduction remittances.

Sending in the wrong amount or submitting payments late can result in penalties and interest charges for employers. For this reason, it is important that payroll professionals follow the CRA’s remitting rules.

This applies whether an employer sends in its own remittances or outsources the job to a payroll service provider. After all, the employer is ultimately responsible for complying with CRA rules.

While payroll professionals only need to comply with the rules for their employer’s remittance category, it is still a good idea to know the general requirements for the other categories in case the organization’s classification changes or the payroll professional switches employers.

 How well do you know federal remitting rules? Test yourself with the following statements:

The CRA sets remittance due dates based on each employer’s pay period. True or False?

False. The CRA divides employers into four remittance categories for determining how often they send in their remittances and when they are due: quarterly remitters, regular remitters (monthly), and two groups of accelerated remitters (up to twice a month and up to four times a month).

In general, the categories are based on the employer’s average monthly withholding amount (AMWA) two calendar years ago.

The AMWA is determined by totalling all of the amounts an employer was required to remit for Canada Pension Plan (CPP), employment insurance (EI), and income tax, divided by the number of months (up to 12) for which the employer was required to remit.

When employers have to remit will depend on their remitter category and when they pay remuneration to employees.

Monthly remitters must send in their withholdings by the 30th day of each month. True or False?

False. Monthly remittances are due by the 15th day of the following month.

Employers with Quebec employees must remit their withholdings to both the CRA and Revenu Québec. True or False?

True. Quebec employers send the CRA remittances for EI, and federal income tax and remit to Revenu Québec their withholdings for the Quebec Pension Plan, Quebec Parental Insurance Plan, and provincial income tax.

If a remitting due date falls on a weekend or a public holiday, the remittances are due by the day before the weekend or holiday. True or False?

False. If a due date is on a Saturday, Sunday, or a public holiday, the remittance is due by the first working day afterwards. The CRA’s website provides a list of public holidays that it recognizes.

Employers that do not have remittances to pay for a month or a quarter must notify the CRA. True or False?

True. Employers must notify the CRA by their remittance due date or as soon as they know they do not need to make source deductions for a month or a quarter. The CRA says this can occur if the employer has no employees or has seasonal workers.

Employers with a nil remittance must inform the CRA of when they will make their next remittance. Employers who do not know are advised to provide an estimated date. Otherwise, the agency says it will expect the employer to remit amounts for the next month or quarter.

Employers are categorized as accelerated remitters if their AMWA from two calendar years ago exceeds $50,000. True or False?

False. There are two groups of accelerated remitters: threshold 1 and threshold 2.

The CRA puts employers in threshold 1 if their AMWA from two years ago was between $25,000 and $99,999.99. It places them in threshold 2 if their AMWA from two years ago was at least $100,000.

It classifies other employers as regular (monthly) remitters if their AMWA from two years ago was below $24,999.99. Some employers with a very low AMWA (for example, under $3,000) may qualify as quarterly remitters if they meet CRA criteria.

Employers do not need to apply to the CRA to be quarterly remitters. True or False?

True. Employers who have had an account with the CRA for at least a year may qualify as quarterly remitters if their AMWA from either one or two calendar years ago is less than $3,000 and they have a perfect record over the last 12 months for deducting and remitting withholdings, paying GST/HST, and filing T4 returns.

If they do, the CRA will notify them in November that they qualify as a quarterly remitter. Afterwards, they can continue to send in remittances quarterly unless notified.

New employers can remit quarterly if they meet two criteria: their monthly withholding amount is less than $1,000 and they maintain a perfect record of complying with CRA rules for their GST/HST and payroll accounts. The monthly withholding amount is the amount the employer would have to send in if it were a regular remitter.

They do not need to apply to do this. Based on the information they provided when they registered, the CRA will notify them if they are quarterly remitters.

Quarterly remittances are due by the 15th day of the month immediately after the end of the quarter.

Threshold 2 remitters must send in remittances semi-monthly. True or False?

False. Threshold 2 remitters must send in their remittances up to four times a month. Their remittances are due three working days after the end of the remitting period.

The remitting periods run from the first to the seventh of the month, the eighth to the 14th, the 15th to the 21st, and the 22nd to the end of the month.

Employers with multiple payroll accounts with the CRA may be classified into more than one remittance category. True or False?

False. Regardless of the number of payroll accounts an employer has with the CRA, the employer’s remitter type will be the same for all accounts.

The CRA charges a flat penalty of $100 a day for each day that an employer is late with its remittance. True or False?

False. The CRA uses a graduated penalty structure for late remittances. For those that are one to three days late, it charges three per cent of the amount due. The penalty rises to five per cent if the remittances are four or five days late.

The penalty increases to seven per cent if the remittances are six or seven days late. If they are more than seven days overdue, the CRA charges a penalty of 10 per cent of the amount due. The penalties are in addition to interest charges.

For subsequent offences in the same calendar year, the CRA may increase the penalty to 20 per cent if the employer acted with gross negligence or made the failure knowingly.

The CRA says it will generally only apply a penalty when employers fail to remit on amounts greater than $500; however, it will penalize employers for failing to remit on lesser amounts if they acted with gross negligence or knowingly did not send in the remittances or knowingly sent them in late.

The CRA can also penalize threshold 2 remitters who do not follow its remitting rules. For instance, it requires threshold 2 remitters to make their payments electronically or in person at their Canadian financial institution.

If the CRA receives the payment at least a full day before the due date, it will consider that the employer made the payment at a financial institution and will not charge a penalty.

However, it can charge a penalty for payments that a threshold 2 remitter makes on the due date, but not at a financial institution. The penalty will be three per cent of the amount due.

If you got all or most of the questions correct, congratulations are in order. You are well aware of your federal remitting rules.

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