How Complex Are Your Canada Tax Payroll Obligations?
If you are just starting a business and are going to be hiring employees then part of your administrative tasks will be completing payroll deductions. You may have to deduct a specific amount of money from your employees’ earnings that go towards the Canada Pension Plan (CPP), Employment Insurance premiums (EI) and income tax. This money deducted is then reported and sent to the CRA.
The first thing you need to do is determine that you are actually an employer and as such you have this CRA obligation. Even if your employee’s are only receiving tips as a form of payment from you then it could still mean that in the eyes of the CRA you are the employer. However, if you are using the services of a self employed individual in your business then this is a different circumstance. In this case you would not be classed as the employer and therefore would not be responsible for making the deductions.
Once you understand the rules for determining your position as an employer, then there are specific rules that you will need to follow in order to carry out your business payroll tax obligations correctly.
You will be dealing with specific forms such as T4s, T4As information slips and summaries. There are also several other types of information slips but these are the two most common types.
The T4 deals with wages paid, and the T4A covers payments made for pension, retirement, annuities and other types of income.
At the end of a year these forms must be completed by the employer and must contain all of that accurate information as it transpired throughout the year. Each employee must receive their appropriate T4s or T4As by the end of February of the following year. This is their source of employment information they require for filling out their tax return.
There are times throughout the year where a business may use temporary help and only paid the worker less than $500. For the work performed. In these cases no deduction requirements existed so therefor no T4s are necessary. There can be exceptions to this if the payment involved group term life insurance payments.
As you can see it is not the size of your business or the number of employees that you have that can make your Canada Tax payroll obligations complex. It is the circumstances in which they perform their services, or purposes of the payments that you are making to them that adds to the level of difficulty in payroll obligations.
There are a several ways of making payroll obligations a little easier.
a) The CRA has a lot of payroll information resources that include videos that you can follow to thoroughly learn about payroll taxes.
b) You can hire bookkeeping service providers who will perform a variety of services throughout your business year, like preparing the weekly payroll records, which are an additional obligation for the business.
c) Using a quality accountant to help prepare the year end payroll information submissions and the necessary T4s and T4As, as well as complete the annual business tax returns.
Staying on top of your payroll tax obligations is your responsibility as a Canadian business owner.