This series will discuss some of the major payroll responsibilities that employers need to be compliant with. Part 1 will discuss the different accounts and programs that a business typically needs to open with the federal and provincial governments as part of setting up payroll. Not all programs are required. It depends on the business type and payroll amounts. Employers are responsible for registering for the required accounts for their situation.
If you have employees, you need to withhold payroll taxes and statutory deductions from their pay and send these deductions to the government every month or every quarter (depending on your remitting requirements). As an employer, you should understand what your responsibilities are for payroll. Payroll compliance can be very complex. Always seek professional advice, especially when setting up your payroll processes. You need to ensure that your payroll processes are set up to be compliant with current legislation. This will reduce the risk of being slapped with fines and penalties for failure to withhold, remit and report statutory deductions and employer payroll taxes.
Directors are held personally liable for unremitted payroll taxes!
Incorporating a business typically protects the owners and directors of a corporation from personal liability for business debts. However, payroll withholdings are one where business owners and corporate directors do not have this protection. Business owners and directors of a corporation are personally liable for unremitted taxes. The CRA can seize the personal assets of the business owners and directors to recover the unremitted payroll taxes.
Setting up Payroll
Open a payroll program account with the Canada Revenue Agency (CRA)
If you are starting a company or getting employees for the first time, you need to open a payroll program account with the Canada Revenue Agency. This account number is what identifies your business as an employer. The CRA will provide you with a 15 character account number that is made up of 9 digits of the business number (BN), 2 letters to identify the program type, and 4 numbers for the account. A typical payroll program account number would look like this:
123456789 RP 0001
The 9 digit business number (BN) is a unique number issued when you open a business and register with the CRA. This number is used to identify the business and will be used for tax purposes.
The next 2 letters are what identifies the account as a payroll program account.
The CRA uses four major types of program accounts
RT – GST/HST
RP – Payroll
RC – Corporation income tax
RM – Import-export
The last 4 digits identify each account in a program that a business may have. So as an example, 123456789 RP 0001 is one account, and 123456789 RP 0002 is another account in the payroll program for the same business.
Register for provincial health taxes and levies
Each province and territory has its own type of health tax or levy. Employers are responsible for registering an account with the provincial or territorial government agency that administers the programs in that jurisdiction. Filing returns and remittance requirements vary by province/territory. You can follow the links below for more details on the registration and remittance requirements: