Employer's Guide Payroll Deductions and Remittances
Employer's Guide Payroll Deductions and Remittances
Employer's Guide Payroll Deductions and Remittances
T4001(E) Rev. 12
an employer;
a trustee;
For information on taxi drivers and drivers of other passenger-carrying vehicles, barbers, and hairdressers, see page 38.
Do not use this guide if you are self-employed and need coverage under the Canada Pension Plan (CPP) or employment
insurance (EI). For information, see the General Income Tax and Benefit Guide.
La version franaise de ce guide est intitule Guide de lemployeur Les retenues sur la paie et les versements.
www.cra.gc.ca
Whats new?
Current rates available on the
CRA Web site
Payroll videos
If you are a small business owner with questions about
payroll, the CRA has a new video that can help. You can
watch the entire video online, or choose the topics that
interest you, such as opening a payroll account, hiring new
employees, payroll deductions, taxable benefits, and more.
Go to www.cra.gc.ca/payroll and select the video series
called Payroll Information for a New Small Business.
Other helpful business videos are available at
www.cra.gc.ca/videogallery by selecting Videos for
businesses.
www.cra.gc.ca
Quarterly remitter
If you are eligible for quarterly remitting, we have to
receive your deductions on or before the 15th day of the
month immediately following the end of each quarter.
The quarters are:
January to March;
April to June;
October to December.
The due dates are April 15, July 15, October 15, and
January 15.
Accelerated remitter
Threshold 1 (average monthly withholding
amount of $15,000 to $49,999.99)
We have to receive your deductions by the following dates:
www.cra.gc.ca
Table of Contents
Page
Chapter 1 General information .....................................
Do you need to register for a payroll account? ................
Are you an employer? .........................................................
What are your responsibilities? .........................................
Payroll deductions tables....................................................
Changes to your business entity ........................................
Filing information returns ..................................................
Penalties and interest ..........................................................
How to appeal a payroll assessment or a CPP/EI
ruling .................................................................................
6
6
6
7
8
9
10
11
11
12
12
12
12
18
18
18
21
21
22
22
22
23
23
13
14
14
15
17
17
17
17
18
18
19
20
21
24
24
25
26
26
26
28
Page
Non-resident employees who perform services in
Canada ..............................................................................
Chapter 6 Special payments ..........................................
Advances ..............................................................................
Bonuses, retroactive pay increases or irregular
amounts ............................................................................
Directors fees ......................................................................
Employees profit sharing plan (EPSP) .............................
Overtime pay .......................................................................
Qualifying retroactive lump-sum payments ...................
Retirement compensation arrangements .........................
Retiring allowances .............................................................
Salary deferral arrangements ............................................
Vacation pay and public holidays ....................................
Wages in lieu of termination notice ..................................
Wage loss replacement plans ............................................
Workers compensation awards ........................................
Chapter 7 Special situations ..........................................
Barbers and hairdressers, taxi drivers and drivers of
other passenger-carrying vehicles.................................
Emergency volunteers ........................................................
Employees of a temporary-help service firm ..................
Employing a caregiver, baby-sitter, or domestic
worker ...............................................................................
Employment outside Canada ............................................
Fishers and employment insurance ..................................
Placement and employment agency workers .................
Seasonal agricultural workers program ...........................
Indian employees ................................................................
28
28
28
28
30
31
32
32
32
33
35
35
36
36
36
38
38
39
40
40
40
41
41
42
42
43
43
43
44
47
47
47
47
48
49
50
51
52
53
Index .....................................................................................
56
58
www.cra.gc.ca
Employment by a trustee
Employment in Quebec
www.cra.gc.ca
Notes
Employers resident outside Canada who employ
Canadian residents but do not have an establishment in
Canada have the same responsibilities as Canadian
employers, regardless of whether the services performed
by the Canadian resident employee are performed in
Canada or outside Canada. For more information about
CPP coverage by an employer resident outside Canada,
see page 18.
www.cra.gc.ca
Keeping records
You have to keep your paper and electronic records for at
least six years after the year to which they relate. If you
want to destroy them before the six-year period is over,
complete Form T137, Request for Destruction of Records.
For more information, go to www.cra.gc.ca/records or
see Guide RC4409, Keeping Records.
the SIN card has an expiry date and the card has not
expired; and
www.cra.gc.ca
Note
A pay period means the period for which you pay
earnings or other remuneration to an employee.
All the payroll deductions tables are available for each
province and territory (except Quebec) and also for
employees working in Canada beyond the limits of any
province, or outside Canada.
Example 1
Your employee does not have to report to any of your
places of business, but you pay the employee from your
office in Quebec. In this case, use the Quebec Payroll
Deductions Tables. The employee is not subject to
CPP contributions, but could be subject to Quebec Pension
Plan (QPP) contributions.
Example 2
Your head office is in Ontario. Your employee works from a
home office in Alberta, but occasionally has to report to
your Alberta office. You pay your employee from your
head office in Ontario. In this case, use the Alberta Payroll
Deductions Tables, if the majority of the employees time
during a pay period is spent at your Alberta office.
Otherwise use the Ontario Payroll Deductions Tables.
If you have employees working in Canada but you do not
have a place of business or an employers establishment
in Canada, the employees are considered employed in
Canada beyond the limits of any province for purposes of
tax at source.
Note 1
If an employee reports to your place of business for part
of a pay period in one province and part in another
province, use the tables for the location in which the
majority of the employees time was spent. If the time is
equal, for example in a bi-weekly pay period the
employee has worked one week in one province and one
week in another province, use the province of
employment for the last location.
Example
Your Canadian resident employees work as salespeople in
Ontario and British Columbia. They work from their home
offices and report directly to your business located outside
Canada. In this case, use the In Canada Beyond the Limits of
any Province/Territory or Outside Canada Payroll Deductions
Tables.
Note 2
An employee who lives in one province or territory but
reports to your place of business in another one may be
subject to excessive tax deductions. If so, he or she can
ask for a reduction in tax deductions by getting a letter
of authority from any tax services office. For more
information, see Letter of authority on page 27.
Non-employment income
If you paid amounts other than employment income, such
as pension income, retiring allowance, or RRSP, use the
provincial or territorial table of the recipients province or
territory of residence. For more information on which tax
tables to use, see Appendix 1 on page 48.
www.cra.gc.ca
10
www.cra.gc.ca
Interest
If you fail to pay an amount, we may apply interest from
the day your payment was due. The interest rate we use is
determined every three months, based on prescribed
interest rates. Interest is compounded daily. We also apply
interest to unpaid penalties. For the prescribed interest
rates we use, go to www.cra.gc.ca/interestrates.
For due dates, see pages 4 and 43.
www.cra.gc.ca
11
is 18 to 70 years of age;
www.cra.gc.ca
Note
If the employee works 35 hours or more, the
employment is pensionable from the first hour of work.
Employment
www.cra.gc.ca
13
www.cra.gc.ca
Special situations
Your employee turns 18 in the year Start deducting
CPP contributions in the first pay dated in the month after
the employee turns 18. When you prorate, use the number
of months after the month the employee turns 18
(see example 1);
Your employee turns 70 in the year Deduct
CPP contributions up to and including the last pay dated in
the month in which the employee turns 70. When you
prorate, use the number of months up to and including the
month the employee turns 70 (see example 2);
Your employee is receiving a CPP or QPP retirement
pension For details, see Employees who are 60 to
70 years of age, on page 17.
Your employee is considered to be disabled under the
CPP An employee who is considered to be disabled under
the CPP does not have to contribute to the CPP. Deduct
CPP contributions up to and including the last pay dated in
the month in which the employee becomes or is considered
to be disabled according to the award letter issued to the
employee by Service Canada. When prorating, use the
number of months up to and including the month the
employee was considered to be disabled.
Note
If the employee is no longer considered disabled under
the CPP, start deducting CPP contributions on the first
pay dated in the month after the employee is no longer
considered disabled. When prorating, use the number of
months after the month the employee ceased to be
disabled.
Your employee dies in the year Deduct CPP
contributions up to and including the last pay dated in the
month in which the employee dies. Also deduct CPP
contributions from any amounts and benefits that are
earned or owed to the employee on the date of death. When
prorating, use the number of months up to and including
the month of death.
Checking the amount of CPP you deducted
1) Prorate the maximum CPP contribution for the year by
following these steps:
Earnings: $1,000
Brents first pay in July is July 11, for the period June 30
to July 13.
= $1,000.00
$134.61
$865.39
4.95%
$42.84
www.cra.gc.ca
15
Earnings: $1,000
Earnings: $1,000
= $1,000.00
= $1,000.00
$134.61
$67.30
$865.39
$932.70
4.95%
4.95%
$42.84
$46.17
16
www.cra.gc.ca
CPP overpayment
If, during a year, you have overdeducted CPP contributions
from your employees remuneration (for example, the
maximum amount of pensionable earnings was reached, or
the employee was not employed in pensionable
employment), you should reimburse the employee the
amount deducted in error and adjust your payroll records
to reflect the reduced deduction. This will result in a credit
on your CRA payroll account equal to the employee and
employer part of the overdeduction. You may then reduce
a future remittance in the same calendar year.
Do not include the reimbursed amount on the T4 slip. If
you cannot reimburse the overpayment, show the total CPP
contributions deducted and the correct pensionable
earnings on the T4 slip of the employee. If you reported the
employees overpayment on the T4 slip, you can ask for a
refund by completing Form PD24, Application for a Refund of
Overdeducted CPP Contributions or EI Premiums. Your
request must be made no later than four years from the end
of the year in which the overpayment occurred.
Example
Sylvie, your employee, works on commission. You pay her
only when she sells something. On June 1, 2012, you paid
her a $1,800 commission. The last time you paid her a
commission was March 16, 2012. There are 76 days between
these two payments.
www.cra.gc.ca
Month
September
October
November
December
Total
CPP
$23.40
$23.40
$24.10
$24.70
$95.60
17
Total
$191.20
$24.70
$24.70
$25.10
$25.10
Recovered
contribution
+
+
+
+
Employees
deduction
=
=
=
=
$48.10
$48.10
$49.20
$49.80
maximum for the year, you should not deduct any more
premiums, even though the excess remuneration is still
considered insurable. For 2012, the maximum annual
insurable earnings is $45,900.
Chapter 3 Employment
insurance premiums
18
www.cra.gc.ca
Note
If you deducted EI premiums and dont think you
should have, you can request a refund of the EI
premiums. Normally this requires that we complete a
ruling to confirm the employees working relationship
with you.
Note
If the employee works 35 hours or more, the
employment is insurable from the first hour of work.
www.cra.gc.ca
19
20
Example
EI premiums you deducted
from your employees in the month ......................... $195.50
Your share of EI premiums ( 1.4) ............................... $273.70
Total amount you remit for EI premiums ................... $469.20
Each year, we determine:
www.cra.gc.ca
Telephone: 1-800-561-7923
Fax:
506-548-7473
Web site:
www.servicecanada.gc.ca/prp
The employers EI premiums are reduced only in respect of
employees covered by the approved plan (this includes
employees serving an eligibility period under the plan of
three months or less). These employees will continue to be
reported under the current payroll account, which will be
set at a reduced rate. An officer of the EI Premium
Reduction Program will ask you to open an additional
payroll account under your business number (BN) to make
a separate remittance for employees not covered by the
plan.
You have to file a separate T4 information return for each
payroll account under your BN:
Calculating EI deductions
To determine the amount of EI premiums to deduct, use
one of the following tools:
www.cra.gc.ca
21
EI overpayment
If, during a year, you have over-deducted EI premiums
from your employee (for example, the maximum amount of
insurable earnings was exceeded, or the employee was not
employed in insurable employment), you should reimburse
the employee the amount deducted in error and adjust your
payroll records in the same year the overpayment was
made to reflect the reduced deduction. This will result in a
credit on your payroll account equal to the employee and
employer portion of the over-deduction. You may reduce a
future remittance in the same calendar year by that amount.
Recovering EI premiums
If you receive a notice of assessment or discover that you
have underdeducted EI premiums, you are responsible for
remitting the balance due (both the employers and
employees shares).
You can recover the employees premiums from later
payments to the employee. The recovered premium can be
equal to, but not more than the premium you should have
deducted from each payment of remuneration.
However, you cannot recover a premium that has been
outstanding for more than 12 months. As well, you cannot
adjust the employees income tax deduction to cover the
EI premium shortfall.
Note
Details on the pensionable and insurable earnings
review (PIER) are contained in Chapter 4.
Note
If the employer does not know the actual number of
hours worked, the employer and the employee can agree
on the number of insurable hours of work for which he
or she is paid. For example, an agreement on hours on
the value of piecework would determine the number of
insurable hours. However, if no contract or agreement
on hours exists or can be reached, we determine the
number of insurable hours by dividing the insurable
earnings by the minimum wage. The result cannot be
more than seven hours per day or 35 hours per week.
EI
$74.00
$74.00
$78.00
$75.00
$301.00
22
Employee
$301.00
Employer
$421.40
Total
$722.40
Employees
deduction
= $148.00
= $152.00
= $158.00
= $155.00
www.cra.gc.ca
www.cra.gc.ca
23
Multiple T4 returns
If you are an employer with a business number (BN) that
has multiple payroll account extensions, we will not send
you a PIER report if we detect deficiencies at the time your
return is processed. At a later date we will compare all
T4 returns for your BN to verify the PIER information and
contact you if we confirm there are deficiencies. If we do
not find any deficiencies, we will cancel the PIER. If you
have any questions, contact the PIER unit in your tax
centre.
EI deficiency calculations
To calculate the required EI premiums, multiply the
EI insurable earnings shown in box 24 of the employees
T4 slip by the current years EI premium rate.
See the yearly EI premium rate on page 20 or in the
publication T4032, Payroll Deductions Tables.
The result is the employees yearly EI premiums, which
you report in box 18 of the T4 slip.
To verify the employees EI premiums before you file the
T4 slip, you can complete Appendix 5 Calculation of
employee EI premiums (2012) on page 52.
If you put an X in box 28 (CPP/QPP, EI and
PPIP exempt) on the T4 slip and you reported amounts
in boxes 16 or 17, and 26 for CPP/QPP or in boxes 18
and 24 for EI, our processing system ignores the X. For
more information, see Box 28 Exempt (CPP/QPP, EI
and PPIP) in Guide RC4120, Employers Guide Filing the
T4 Slip and Summary.
If you issue more than one T4 slip to the same employee,
you should report the insurable earnings amount for each
period of employment in box 24 on each T4 slip. Reporting
these amounts can reduce unnecessary PIER reports for
EI deficiency calculations, especially if the employee
worked both inside and outside Quebec.
www.cra.gc.ca
Employment in Quebec
Individuals who work or receive other income (such as
pension income) in the province of Quebec have to
complete a federal Form TD1, Personal Tax Credits Return,
and a provincial Form TP-1015.3-V, Source Deductions
Return.
Individuals who incur expenses related to earning
commissions have to complete a federal Form TD1X,
Statement of Commission Income and Expenses for Payroll Tax
Deductions, and a provincial Form TP-1015.R.13.1, Statement
of Commissions and Expenses for Source Deduction Purposes.
Quebec forms can be obtained from Revenu Qubec
(see page 6).
Claim codes
The total amount of personal tax credits an employee
claims on Form TD1 will determine which claim code to
use. An explanation of the claim codes is in the Payroll
Deductions Tables (T4032).
In some cases, you will use one claim code for the federal
Form TD1 and another claim code for the provincial or
territorial Form TD1. If your employee does not complete
within one month of the date any change occurs that will
substantially change the estimated remuneration or
expenses previously reported.
Note
An employee may choose, at any time during the year,
to revoke in writing the election he or she made. Use the
www.cra.gc.ca
25
26
www.cra.gc.ca
union dues;
Note
The Quebec provincial rules for reducing remuneration
for union dues are differentsee the publication
TP-1015.G-V, Guide for Employers Source Deductions and
Contributions, which you can get from Revenu Qubec
Web site (see page 6).
$25.00
$ 5.50
$57.75
$88.25
Letter of authority
To reduce remuneration on which you have to deduct tax
in situations other than the ones described above, you need
a letter of authority from a tax services office. For example,
if you do not withhold the deductible RRSP contribution
but your employee makes the contributions or payments
himself or herself during the year, or if an employee who
lives in one province or territory but works in another is
subject to excessive tax deductions, the employee has to
give you a copy of a letter of authority that we issued.
To get a letter of authority, the employee has to send a
completed Form T1213, Request to Reduce Tax Deductions at
Source for Year(s) ____, or a written request to any tax
services office. The employee should include documents
that support his or her position why less tax should be
deducted at source. For example, if the employee regularly
contributes to an RRSP in the year, he or she should
provide documents to show the amounts he or she
contributes.
It takes us about four to six weeks to process a request of
this type. We usually issue a letter of authority for a specific
Contributions to an RPP
If the registered pension plan (RPP) requires or permits
employees to make contributions, you have to determine
the amount of contributions that your employee can deduct
on his or her income tax and benefit return. You have to do
this before you can calculate the amount of tax to deduct. In
addition to contributions for current service, make sure you
consider any contributions for past service.
For information on contributions to an RPP for current or
past service, see Interpretation Bulletin IT-167R6, Registered
Pension Plans Employees Contributions, and Guide T4040,
RRSPs and Other Registered Plans for Retirement.
You have to report these contributions on a T4 slip. For
information on how to report RPP contributions on a
T4 slip, see Box 20 RPP contributions in Guide RC4120,
Employers Guide Filing the T4 Slip and Summary.
www.cra.gc.ca
27
Note
Payments to non-resident individuals, partnerships, or
corporations for services rendered in Canada (that they
did not perform in the ordinary course of an office or
employment) are subject to tax withholdings. See
Guide RC4445, T4A-NR Payments to Non-Residents for
Services Provided in Canada. In addition, tax withholding
may apply, if you pay or credit an amount to a
non-resident of Canada, such as interest, a dividend,
rental income, a royalty, pension income, a retiring
allowance, or other similar types of income, or if you
pay, credit, or provide an amount as a benefit for film or
video acting services rendered in Canada. See Guide
T4061, NR4 Non-Resident Tax Withholding, Remitting and
Reporting.
28
Advances
If you pay part of your employees salary before the usual
payday, you have to deduct CPP, EI and income tax from
the total advance. To determine the amounts to deduct, use
the regular pay period and reconcile the income and
deductions when the regular payday occurs.
EI premiums; and
income tax.
Note
Retroactive payments related to previous years, paid in
the current year, are taxed using the current income tax
rates unless a special rate is approved by the CRA. See
page 32 for information about qualifying retroactive
payments.
CPP contributions
If you have already deducted the yearly maximum CPP
contributions from an employees income, do not deduct
more contributions.
Note
Deduct CPP contributions from monies earned before
the death of an employee and not yet paid at the time of
death.
www.cra.gc.ca
22.28
EI premiums
Calculate as follows:
Income tax
union dues;
The calculation must take into account all bonuses you paid
during the year. You have to calculate the amount of tax to
deduct for the entire year, regardless of when you paid the
bonus.
www.cra.gc.ca
29
Calculate as follows:
$157.16
$157.16
$314.32
EI premiums
Directors fees
Employment income
Directors fees paid to a corporate director are employment
income, whether they are paid to a non-resident for services
rendered in Canada or to a Canadian resident. Report
directors fees on a T4 slip.
www.cra.gc.ca
Using the claim amount from Form TD1 and the amount
determined above, find the monthly deduction and
multiply it by the number of months that have passed
since the last payment or since the first day of the year,
whichever is later.
Income tax
Use the calculation in the previous section to determine the
amount of tax to withhold for the directors fees.
www.cra.gc.ca
31
Overtime pay
CPP contributions, EI premiums, and
income tax
You have to deduct CPP contributions, EI premiums, and
income tax from overtime pay. When the overtime pay is
paid in the same pay period in which it is earned, add the
overtime pay to the employees regular pay and make the
deductions from the total amount in the usual way. When
the overtime pay is paid in a later pay period, treat the
overtime pay as a bonus and make the deductions using the
method outlined in the section called Bonuses, retroactive
pay increases or irregular amounts on page 28.
32
Withholding rates
Lump-sum payments may be considered regular
remuneration and subject to CPP, EI and tax as discussed in
this guide. However, certain types of lump-sum payments
are subject to income tax only and qualify for the lump-sum
withholding rates. See Special payments in
Guide RC4157, Deducting Income Tax on Pension and Other
Income, and Filing the T4A Slip and Summary, to determine if
the payment you are making qualifies for those rates.
Retirement compensation
arrangements
A retirement compensation arrangement (RCA) is a plan or
arrangement between an employer and an employee under
which:
www.cra.gc.ca
Retiring allowances
Since 2011 (for the 2010 tax year) retiring allowances are
reported on the T4 slip instead of the T4A slip.
A retiring allowance (also called severance pay) is an
amount paid to officers or employees when or after they
retire from an office or employment in recognition of long
service or for the loss of office or employment.
The result is the amount you deduct from the lump sum
payment if the recipient requests it.
If you pay a retiring allowance to a non-resident of
Canada, withhold 25% of the retiring allowance (subject to
various tax conventions and agreements). Send this amount
to the Receiver General on the non-residents behalf. For
more information see Guide T4061, NR4 Non-Resident Tax
Withholding, Remitting and Reporting.
Transfer of a retiring allowance
Individuals with years of service before 1996 may be able to
directly transfer all or part of a retiring allowance to a
registered pension plan (RPP) or a registered retirement
savings plan (RRSP). This part is commonly referred to as
the eligible portion or the amount eligible for transfer.
A retiring allowance may include an eligible portion and a
non-eligible portion.
A retiring allowance may be paid over one or more years.
The amounts paid in any particular year may be transferred
to an RRSP or an RPP. The amounts transferred cannot
exceed the employees eligible portion of the retiring
allowance minus the eligible portion transferred by you in a
prior year.
The amount that is eligible for transfer under
paragraph 60(j.1) of the Income Tax Act (the Act)
is limited to:
$2,000 for each year or part of a year before 1996 that the
employee or former employee worked for you (or a
person related to you); plus
www.cra.gc.ca
33
$20,000
plus
$ 4,500
$24,500
Note
You can no longer transfer $2,000 per year of service to
an RPP or RRSP for 1996 and later years.
Bruno is allowed to transfer $24,500 directly into an RPP or
RRSP with no tax deductions required.
The difference of the non-eligible amount of $25,500
($50,000 $24,500) between the allowance paid and the
maximum eligible for transfer could be directly transferred
to Brunos RRSP without tax deductions if he gives you a
written statement indicating that the amount is within his
RRSP deduction limit.
Example 2
Colette is retiring. She is paid a retiring allowance of
$35,000 in recognition of long service, of which $12,000 is
eligible for transfer to her RRSP under paragraph 60(j.1) of
the Income Tax Act. Colette wants you to transfer the total
amount of the eligible retiring allowance ($12,000) to her
RRSP. She also requests that you transfer an additional
$11,000 to her RRSP and gives you a written statement
indicating that her RRSP deduction limit is $11,000.
You have to calculate the amount of remuneration subject
to tax deductions at source as follows:
Retiring allowance ..................................................... $35,000
Minus:
www.cra.gc.ca
Income tax
Deduct income tax from the following amounts:
EI premiums
Deduct EI premiums from the participants gross salary
(including deferred amounts) while the person is
working. Do not deduct more than the yearly maximum.
Note
Custodians and trustees who administer prescribed
plans have the same responsibilities as an employer for
deducting, remitting, and reporting deductions.
www.cra.gc.ca
35
36
Income tax
When wage loss benefits are subject to CPP contributions
and EI premiums, income tax should be withheld on these
payments in the usual manner. The employer, trustee, or
insurance company has to report these payments, as well as
the income tax, CPP contributions, and the EI premiums
deducted, on a T4 slip.
When wage loss benefits are not subject to CPP
contributions or EI premiums, they are still subject to
income tax, however, no withholding is required. The
trustee or insurance company will still have to report these
payments on a T4A slip.
www.cra.gc.ca
Reporting requirements
An employer who continues to pay an employees salary
before and after a workers compensation board claim is
decided is not allowed to retroactively reduce earnings in
the current year, or amend a previous-year T4 slip, and call
the earnings workers compensation benefits. As a result,
the employee has to report, in the year it is received, the
salary he or she receives before and after a workers
compensation board claim is decided.
If the claim is denied and you use the employees sick leave
credits to repay the loan, this amount has to be reported on
a T4 slip with CPP contributions, EI premiums, and
income tax withheld.
If income tax deductions cause undue hardship to the
employee, he or she can contact any tax services office to
ask for a letter of authority. This will allow you to deduct
less tax.
regular employers who are not directly liable for the cost
of amounts that the workers compensation board
awards to employees.
Note
Since employers cannot amend T4 slips or the
current-year payroll records, they are not able to recover
their share of the CPP and EI contributions.
Advances or loans
Advances or loans made to an employee that are equivalent
to an anticipated workers compensation award will not be
treated as employment income. As a result, you do not
have to deduct CPP contributions, EI premiums, and
income tax on this amount. It is not reported on a T4 slip at
year-end. We do not consider any interest that accumulates
on advances or loans while waiting for a claim decision as a
taxable benefit.
Top-up amount
A top-up amount is an amount that you pay your employee
in addition to the amount of a workers compensation
award that the employee is paid by a workers
compensation board.
Exclude a top-up amount (even if it is paid as sick leave)
from insurable earnings if you pay it after the claim is
accepted by the workers compensation board. However,
the top-up amount is subject to CPP contributions and
income tax, and you have to report it on a T4 slip at
year-end.
An amount you pay in addition to an advance or loan is not
a top-up amount if you pay it while waiting for a decision
on a workers compensation board claim. This amount is
considered to be employment income, and you have to
deduct CPP contributions, EI premiums, and income tax.
www.cra.gc.ca
37
Results
When John files his 2013 income tax and benefit return,
he will claim this amount as a deduction for other
employment expenses (repayment of salary or wages).
Results
38
www.cra.gc.ca
Emergency volunteers
www.cra.gc.ca
39
Note
For volunteer firefighters, report the exempt amount
(up to $1,000) using code 87 in the Other information
area of the T4 slip. Do not report the exempt amount in
box 14.
CPP contributions
The EI conditions below also apply for CPP purposes.
However, if the individual qualifies for the exemption for
income tax purposes, only the amount that is more than
$1,000 is subject to CPP contributions. If the individual does
not qualify for the exemption, deduct CPP contributions on
the total amount paid.
EI premiums
Even if an individual is considered to be a volunteer for
income tax purposes, the amount received (including the
amount of the exemption up to the maximum of $1,000)
is subject to EI premiums if all of the following conditions
are met:
Income tax
As indicated before, if the individual qualifies for the
exemption, there is no income tax to pay on the first $1,000
that he or she receives. Deduct income tax only on the
amount that is more than $1,000. However, if the individual
does not qualify for the exemption, deduct income tax on
the total amount paid.
hire a person;
Employees of a temporary-help
service firm
You may be the proprietor of a temporary-help service
firm. Temporary-help service firms are service contractors
who provide their employees to clients for assignments.
The assignments may be temporary, depending on the
clients needs.
Workers of these firms are usually employees of the firms.
As a result, you have to deduct CPP contributions,
40
www.cra.gc.ca
www.cra.gc.ca
41
Indian employees
The following information will help you determine which
deductions you have to make for Indians.
Definitions
Indian
An Indian is a person who is registered or entitled to be
registered as an Indian under the Indian Act.
Reserve
The term reserve is defined under the Indian Act and, for
these purposes, includes all settlements given reserve-like
treatment for taxation purposes under the Indian Settlements
Remission Order and any other areas similarly treated under
federal legislation such as Category I-A lands under the
Cree-Naskapi (of Quebec) Act.
Indian living on a reserve
This means an Indian who lives on a reserve in a domestic
establishment that is his or her principal place of residence
and that is the centre of his or her daily routine.
Employer resident on a reserve
When an employer is resident on a reserve, the reserve is
the place where the central management and control over
the employer organization is actually located.
Note
We usually consider a group that performs the function of
board of directors of an organization as exercising the
central management and control of an organization.
However, it may be that some other person or group
manages and controls the organization. Generally, a
person or group manages and controls an organization at
the principal place of business. However, this activity can
occur in a place other than the principal administrative
office of the organization. It is a question of fact as to
where the central management and control is exercised.
Guidelines
www.cra.gc.ca
Note
EI benefits, retiring allowances, CPP payments,
registered pension plan benefits, or wage loss
replacement plan benefits will usually be exempt from
income tax when they are received as a result of
employment income that was exempt from tax. If a part
of the employment income was exempt, then a similar
part of these amounts will be exempt.
For more information about the Indian Act Exemption for
Employment Income Guidelines and the different registration
dates, go to www.cra.gc.ca/brgnls/ndns-eng.html.
Regular remitter
If you are a new employer, or your average monthly
withholding amount (AMWA) two years ago was less than
$15,000, you are a regular remitter and have to remit your
deductions so we receive them on or before the 15th day of
the month following the month you made the deductions.
Note
We consider a remittance that was due on January 15 of
the current year (for deductions you made in December
of the previous year) to be late if it is paid with the
previous years T4 information return, and this return is
filed after January 15.
Quarterly remitter
www.cra.gc.ca
43
Associated corporations
Accelerated remitter
Remittance frequency
Threshold 1
This group consists of employers, including those with
associated corporations, who had a total average monthly
withholding amount (AMWA) of $15,000 to $49,999.99
two calendar years ago.
Threshold 2
This group consists of employers, including those with
associated corporations, who had a total average monthly
withholding amount (AMWA) of $50,000 or more
two calendar years ago.
Remittance forms
Example
If the payday falls during the period of the 1st through the
7th day of April 2012, the due date is April 12, as the three
working days after this period are counted from the day
after Easter Monday (the 9th).
Large employers with an average monthly withholding
amount of $50,000 or more are required to pay their
remittances at a financial institution. We consider all
payments made to the CRA at least one full day before the
due date to have been made at a financial institution and a
penalty will not be charged.
Payments made on the due date but not at a financial
institution, are subject to a penalty of 3% of the amount
due.
All payments made after the due date, are subject to the
graduated penalty rates. For details, see page 11.
Threshold 1 and Threshold 2 accelerated remitters are
considered to be monthly accelerated remitters if they have
a payroll frequency of only once a month.
44
Form PD7A
We will send Form PD7A to each eligible regular, quarterly,
and monthly accelerated remitter to remit deductions.
www.cra.gc.ca
It shows:
Form PD7A(TM)
current balances:
amounts paid for (year indicated), which are the
amounts you paid for your deductions for the year
indicated; and
assessed amount owing, which is your balance owing
on assessments of deductions, including penalties and
interest; and
an explanation of changes.
current remittances.
When you complete the bottom part, ensure that the
following information is correct:
remittances.
Back of the form This part can be used if you will not be
current balances:
amounts paid for (year indicated), which are the
amounts you paid for your deductions for the year
indicated; and
assessed amount owing, which is your balance owing
on assessments of deductions, including penalties and
interest; and
an explanation of changes.
www.cra.gc.ca
45
E-PD7A
E-PD7A is an electronic service that lets you receive and
view your Statement of Account for Current Source
Deductions. The E-PD7A replaces the paper version of the
PD7A and the PD7A(TM). To view financial transactions
displayed on the PD7A form, use the View account
transaction service. For more information, and to find out
if you can register, go to www.cra.gc.ca/epd7a.
My Business Account services
You can view account transactions and account balances.
The following amounts can be viewed by using the View
account balance service:
by mail.
Monday to Friday
Saturday
Form PD7A-RB
Each December, we provide accelerated remitters (except
monthly accelerated remitters who receive Form PD7A) a
booklet of PD7A-RB forms (either 27 or 54 forms) to use to
remit deductions. These booklets are printed once a year.
If you require additional forms, call 1-800-959-5525.
46
Go to:
www.cra.gc.ca
By mail
Remittance methods
There are several methods to choose from when remitting
your payroll deductions. However, if you are a threshold 2
remitter, you must remit payroll deductions electronically
or in person at your Canadian financial institution on or
before the due date.
We consider all payments made to the CRA at least one full
day before the due date to have been made at a financial
institution and a penalty will not be charged.
Payments made on the due date but not at a financial
institution, are subject to a penalty of 3% of the amount due.
All payments made after the due date are subject to the
graduated penalty rates. For more information, see page 11.
Remittances are deemed to have been made on the day on
which it is received by the Receiver General, and as such,
you should choose the appropriate remittance method to
meet your due date.
Regardless of your remittance method, allow 10 days for
your remittance to process.
Electronic payments
Make your payment online using the CRA's My Payment
service at www.cra.gc.ca/mypayment or using your
financial institution's telephone or Internet banking
services. For more information, go to
www.cra.gc.ca/electronicpayments or contact your
financial institution.
Payment arrangement
Payroll deductions must be held in trust for the Receiver
General in a separate account than your operating business
account, but if for any reason you cannot pay your balance
owing, call 1-877-397-6014. We will still charge a penalty
and daily compound interest on any outstanding balance.
Notice of assessment
If you receive a notice of assessment, use only the
remittance form attached to the notice to make your
payment.
Use only forms PD7A, PD7A(TM) and PD7A-RB for
current remittances of CPP, EI, and income tax.
Service bureaus
Service bureaus or similar institutions that take care of
payroll deductions for clients can remit a lump-sum
payment for the amounts they deduct for their clients. They
have to provide the following information for each client:
account number;
amount remitted;
Remitting error
If you discover that you made an error in remitting your
deductions, you should remit any shortage as soon as
possible by electronic payment, another remittance form or
by writing a short letter giving your account number and
the pay period for which it applies.
If you have over-remitted, reduce your next remittance by
the amount of the overpayment.
If your remittance is late, we may apply a late-remitting
penalty. For more information, see page 11.
www.cra.gc.ca
47
Employee works in
Canada, but does not
report for work at an
establishment of the
employer
Employee works in
Canada, but employer
does not have an
establishment in
Canada
Resident of Canada
Non-resident, including a
commuter (see Note)
Note
For more information, see Interpretation Bulletin IT-221R3 CONSOLID, Determination of an Individuals Residence Status.
48
www.cra.gc.ca
Enter any taxable benefits and allowances for the period ................................................ $
Enter any income from Employment, benefits and payments not subject to
CPP contributions, described in Chapter 2 of this guide................................................... $
Step 2 Enter the basic exemption for the pay period. Use the table below, or the following equation:
Annual basic exemption ($3,500 for 2012) divided by the number of pay periods in the year ..........................
8
$
Basic exemption
Annually (1)
$3,500.00
Semi-annually (2)
$1,750.00
Quarterly (4)
$875.00
Monthly (12)
$291.66
Semi-monthly (24)
$145.83
Bi-weekly (26)
$134.61
Bi-weekly (27)
$129.62
Weekly (52)
$67.30
Weekly (53)
$66.03
22 pay periods
$159.09
13 pay periods
$269.23
10 pay periods
$350.00
Daily (240)
$14.58
$1.75
Hourly (2,000)
www.cra.gc.ca
49
Step 3 Pensionable earnings for the period of employment (to a maximum of $50,100 for 2012)
Line 1 minus line 2 ....................................................................................................................................
Step 5 CPP contributory earnings for the period of pensionable employment Line 3 minus line 4 ....................
Step 6 Enter the CPP contribution rate for the year (4.95% for 2012) ..................................................................
Step 7 Employees required CPP contributions for the period of pensionable employment (maximum
$2,306.70 for 2012) Line 5 multiplied by the rate on line 6 .....................................................................
Step 8 Enter the CPP contributions from the employees payroll master file that you
deducted for the period of pensionable employment .................................................................................
If the amount on line 9 is positive, you have underdeducted contributions. If this is the case, add line 8 and line 9 and include the
total in box 16, Employees CPP contributions, of the T4 slip.
Note
If the amount on line 9 is negative, you may have overdeducted contributions. If this is the case, verify the employees master file
to ensure that the amounts on line 1 and line 3 are correct. For more information on refunding CPP overpayments, see page 17.
50
www.cra.gc.ca
CPT form
number
January 1, 1994
111
November 1, 1987
112
Barbados
January 1, 1986
113
Belgium
January 1, 1987
121
Chile
June 1, 1998
114
Croatia
May 1, 1999
115
Cyprus
May 1, 1991
116
Country
Antigua and
Barbuda
Austria
January 1, 2003
137
Denmark
January 1, 1986
117
Dominica
January 1, 1989
118
Estonia
November 1, 2006
142
Finland
February 1, 1988
128
France
March 1, 1981
52
April 1, 1988
130
Greece
Grenada
Lithuania
Luxembourg
Czech Republic
Germany
Country
Macedonia
Malta
Mexico
Morocco
Netherlands
Norway
Philippines
Poland
April 1, 1990
60
November 1, 2011
163
March 1, 1992
61
May 1, 1996
62
March 1, 2010
166
April 1, 2004
63
January 1, 1987
127
March 1, 1997
64
October 1, 2009
161
May 1, 1981
55
November 1, 2011
165
January 1, 1994
65
Saint Lucia
January 1, 1988
67
November 1, 1998
66
December 1, 1997
54
February 1, 1999
119
Slovakia
January 1, 2003
138
January 1, 2001
68
January 1, 1988
125
April 1, 2003
129
October 1, 1995
69
July 1, 1999
70
January 1, 2005
72
January 1, 1994
120
Hungary
October 1, 2003
141
Spain
Iceland
October 1, 1989
49
Sweden
Ireland
January 1, 1992
50
Switzerland
September 1, 2003
140
Italy
January 1, 1979
51
Trinidad and
Tobago
Jamaica
January 1, 1984
57
Japan
March 1, 2008
122
Jersey
January 1, 1994
120
May 1, 1999
58
November 1, 2006
143
Latvia
144
Romania
Guernsey
Korea (South)
November 1, 2006
CPT form
number
Portugal
Slovenia
Israel
Date in force
Turkey
United Kingdom
United States
Uruguay
www.cra.gc.ca
April 1, 1998
71
August 1, 1984
56
January 1, 2002
136
51
Step 2 Enter the employees EI premium rate for the year (1.83% for 2012 for Quebec, use 1.47%) ................
Step 3 Multiply line 1 by line 2 to calculate the employees EI premiums payable for the year.
The amount should not be more than the maximum annual amount of $839.97
($674.73 for Quebec) for 2012 ..................................................................................................................
Step 4 Enter the employees EI premium deductions for the period of insurable
employment as indicated in the employees payroll master file .................................................................
If there is an amount on line 5 and it is positive, you have underdeducted. If this is the case, add line 4 and line 5 and include the
total in box 18, Employees EI premiums, of the T4 slip.
Note
If the amount on line 5 is negative, you have overdeducted premiums. If this is the case, verify the employees payroll master file
to ensure that the amount on line 1 is correct. For more information on refunding EI overpayment, see page 22.
52
www.cra.gc.ca
he following chart will help you determine whether or not to deduct CPP, EI, and income tax on the following special
payments you make to your employees.
CPP
1
contributions
EI
1
premiums
Tax
deductions
Advances
Yes
Yes
Yes
No
No
Yes
Yes
Yes
Yes
No
No
No
Yes
Yes/No
Yes
Corporate employee who controls more than 40% of the corporations voting
shares receiving salary, wages or other remuneration
Yes
No
Yes
No
Yes
Yes/No
Yes/No5
Yes
No
No
No
Special payments
Fee only
Yes
Yes/No
Yes/No
Yes/No
Yes
No
Yes
Yes/No
10
No
Yes
No
No
No
11
No
Yes/No
13
No
Yes/No
Yes/No
Yes/No
12
14
If you have already deducted the total yearly maximum contributions from the employees income, do not deduct more contributions. Do not
consider amounts deducted by previous employers during the same year unless there was a restructure or reorganizationsee page 10.
2
Do not deduct EI premiums if the following two conditions are met:
the total amount of your payment and the EI weekly benefits does not exceed the employees normal weekly gross salary; and
your payment does not reduce any other accumulated employment benefits such as banked sick leave, vacation leave credits, or retiring
allowance.
3
Do not deduct CPP contributions when the employment is performed totally or partly outside Canadasee page 18.
4
Do not deduct income tax if you estimate that the total fee paid in the year is less than the total claim amount on Form TD1.
5
Determination to deduct CPP, EI or both depends on the status of the resident directors employment. For more information on directors fees, see
page 30 of this guide.
6
Deduct CPP contributions when the international organization or the foreign government agree to cover their employees. A list of the
international organizations and foreign countries can be found under Schedules V and VII of the Canada Pension Plan Regulations (except for
employment listed in Schedules VI and VIII).
7
Deduct EI premiums when the foreign government or international organization agrees to cover its Canadian employees under Canadas EI
legislation (in this case, the employment is insurable if Human Resources and Skills Development Canada agrees).
8
For more information on non-resident employees, see page 28 of this guide.
9
Deduct CPP contributions unless the worker has a certificate of coverage from the competent authority of his/her country confirming that the
worker is contributing to a pension plan in his/her country. Do not deduct CPP contributions if the employer is not residing in Canada and
does not have an establishment in Canada, unless the employer has filed Form CPT13.
10
Do not deduct CPP contributions unless the employer has filed Form CPT13.
11
Deduct CPP contributions unless it is employment not subject to CPP deductions, as indicated in Chapter 2 of this guide.
12
For more information about bartering, see IT-490, Barter Transactions. Do not deduct income tax unless the taxpayer is an employee and makes a
regular habit of providing services for cash.
13
Do not deduct CPP contributions on benefits paid by HRSDC or a provincial government. Deduct CPP contributions on payments made by an
employer unless the individual is working as a self-employed individual or it is employment not subject to CPP contributions, as indicated in
Chapter 2 of this guide.
14
Deduct income tax if the payment is considered government financial assistance, but if the payment is considered an inducement to earn business
income, do not deduct income tax.
www.cra.gc.ca
53
EI
1
premiums
Tax
deductions
Yes/No
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Incentive payments
Yes
Yes
Yes
Yes/No
No
Yes
Yes
Yes
Yes
Maternity benefits amounts paid to cover the waiting period or to increase the
benefit
Yes
Yes/No
Yes
Yes
Yes
Yes
Yes
Yes/No
Yes
No
No
Yes
Yes/No
Yes/No16
Yes
Yes
Yes
Yes
No
No
Yes
No
No
Yes
Yes
Yes
Yes
Salary
Yes
Yes
Yes
Yes
Yes
Yes
Sick leave, amounts received while on sick leave, sick leave credits, payments
for
Yes
Yes
Yes
No
Yes/No
No
Yes/No
Yes/No
Yes
Yes
Yes
Tips and gratuities (direct tips or gratuities - not controlled by the employer)
No
No
No
Yes
Yes
Yes
CPP
1
contributions
Special payments
or under a similar benefit that a provincial government or other organization
provides and is the subject of an agreement under section 63 or the
Employment Insurance Act
Employment when employment insurance premiums have to be paid according
to the unemployment insurance laws of any state of the United States, the
District of Columbia, Puerto Rico, or the Virgin Islands, or according to the
Railroad Unemployment Insurance Act of the United States
17
15
10
15
16
19
20
18
Yes
21
22
22
Deduct CPP contributions on payments made by an employer unless the individual is working as a self-employed individual or it is employment
not subject to CPP contributions as indicated in Chapter 2 of this guide.
To determine if you have to deduct CPP, EI or both, see Prescribed plans or arrangements on page 35.
17
Qualifying retroactive lump-sum payments may be subject to CPP and/or EI in addition to income tax.
18
Do not deduct income tax on the amount of retiring allowance that is transferred directly to the recipients RPP or RRSP (up to the amount of the
employees available RRSP deduction limit)see page 33 for details.
19
Deduct EI premiums if you would have negotiated a similar contract with a person that you deal with at arms length.
20
Deduct EI premiums, unless the worker is remunerated by an employer residing outside Canada.
21
Canadian earnings are subject to tax unless provisions of an income tax convention/treaty dictate otherwise.
22
For more information on determining if the tips and gratuities are controlled or direct, see www.cra.gc.ca/tx/hm/xplnd/tps-eng.html.
16
54
www.cra.gc.ca
No
No
Yes/No
Wages
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
23
23
24
Yes
Yes
Yes
No
No
No
Yes
Yes
Yes
No
Yes
Yes
No
Yes
24
Yes
Deduct income tax, unless the employer pays the remuneration directly to the order or the employee provides the employer with a letter of
authority approved by a tax services office.
An amount you pay in addition to an advance or loan is not a top-up amount if you pay it while waiting for a decision on a workers
compensation board claim. This amount is considered as employment income.
www.cra.gc.ca
55
Index
Page
Page
Baby-sitters .............................................................................. 40
Bankruptcy ................................................................................. 7
Barbers and hairdressers ........................................................ 38
Bonuses ..................................................................................... 28
Books ........................................................................................... 7
Business, change in legal status ............................................. 10
Business goes through a restructure or reorganization ...... 10
Business Number and your payroll account.......................... 6
Business stops operating .......................................................... 9
Income tax
Claim codes ........................................................................... 25
Form TD1 (Individuals) ....................................................... 24
Form TD1-IN (Indian).......................................................... 42
Form TD1X (Commissions with expenses) ....................... 25
Form TD3F (Fishers) ............................................................ 26
How to calculate how much tax to withhold ................... 28
Reducing remuneration subject to income tax ................. 26
Remuneration subject to income tax .................................. 26
Request for more tax deductions........................................ 25
Indian ......................................................................................... 42
Application for CPP coverage ............................................ 42
Interest ....................................................................................... 11
Maids ........................................................................................ 40
No employees for a period during the year ........................... 9
Non-resident directors............................................................. 30
Non-resident employees who perform services
in Canada ............................................................................... 28
Online services......................................................................... 43
Authorize or manage representatives ................................. 6
File a return ........................................................................... 44
Provide a nil remittance....................................................... 46
Register a formal dispute (Appeal) .................................... 11
Request a CPP/EI ruling ................................................. 6, 40
Request to close payroll account .......................................... 9
View account balance .......................................................... 46
View account transactions................................................... 46
View remitting requirements .............................................. 43
View return status ................................................................ 10
Ottawa Technology Centre address ...................................... 58
Overseas employment tax credit............................................ 41
Overtime pay ............................................................................ 32
www.cra.gc.ca
Page
Page
www.cra.gc.ca
57
Addresses
Tax centres
Electronic payments
Make your payment online using the CRA's My Payment
service at www.cra.gc.ca/mypayment or using your
financial institution's telephone or Internet banking
services. For more information, go to
www.cra.gc.ca/electronicpayments or contact your
financial institution.
58
www.cra.gc.ca
If you are not satisfied with the service that you have
received, contact the CRA employee you have been dealing
with or call the telephone number that you have been
given. If you are not pleased with the way your concerns
are addressed, you can ask to discuss the matter with the
employees supervisor.
If the matter is still not settled, you can then file a service
complaint by completing Form RC193, Service-Related
Complaint. If you are still not satisfied, you can file a
complaint with the Office of the Taxpayers Ombudsman.
www.cra.gc.ca
59