In this short article, we will do a high-level overview of payroll taxes.
If your company will have employees, unfortunately as an employer, you are responsible for withholding taxes from your employees’ paychecks and paying it over to the CRA. For the most part, payroll taxes will consist of income tax deductions, E.I. or Employment Insurance and C.P.P. or Canada Pension Plan contributions. There are two components involved namely, the employee contribution and the employer contribution. You will see exactly what is meant by that when we do an example.
Payroll deductions have a deadline of the 15th day of each month after you pay your employees. For example, if Joe Soap gets paid on 7 February, you have until 15 March to pay CRA the payroll deductions that are due. Failure to pay on time will result in penalties.
Each year, before the end of February, you as a business owner have to file a T4 Summary of Income Slip with the CRA for every worker that you keep on your payroll register.
An excellent tool that I encourage you to use for calculating payroll deductions is CRA’s online payroll calculator.
Payroll Deductions Example
