Your team might be just you when you start your company. As your business grows, you will need to have a high-quality online payroll system.
There are many things to know if this is your first attempt at online payroll implementation. Your payroll will run smoothly with the help of experts such as the Quick Books Resource Centre and Canada Revenue Agency (CRA).
You can review each step to create online payroll, calculate deductions and keep your accounting records using Quick Books. It is easy to understand and you will be able to tackle these tasks with confidence.
What are the steps to create an online payroll?
You must register a company number (BN), before you can open a payroll account at the CRA. A business number is a nine-digit unique number that helps identify businesses in federal, provincial and local government matters. Your BN is used by the CRA to identify your business for tax matters relating to your business. This includes earnings taxes and payroll taxes.
When you register for any of the four main government programs, your BN is what identifies your company.
- Harmonized sales taxes /Goods and Services Tax (GST/HST). Payroll deductions for employees Import/export Corporate income tax.
Your business will receive a 15-character account ID for each program account. Your BN is the first nine digits in your account number. The program is identified by a two-letter acronym. A four-digit number refers to the account. Your BN will be initialed RP if you sign up online for payroll. Here is a list of Canadian business numbers.
- RT for HST accounts
- RP for payroll accounts RM to import-export accounts RC to corporate income tax accounts
Individual BNs are available to all sole proprietors, partnerships and corporations as well as trusts and trusts. Your BN is used for all business dealings with the agency. Keep it handy or memorize it.
Register for the Payroll program
It is important to know the first due date for your online payroll. Your company’s first remittance date is the date it sends information to the CRA. To submit payroll deductions on time, you will be able to know your remittance due dates. This will ensure that you avoid late fees.
The 15th day following the month in which you began withholding deductions from the employee’s paycheck is your first due date for remittance.
Imagine that you hire an employee in March and decide to pay them biweekly. Your first payment is due on April 15, so you make it on March 25.
Hire an employee March 25, and pay them April 3. Your first remittance due date for this is May 15.
Even if your payroll program doesn’t require you to open an account, you must still calculate deductions and send them in the due date. The CRA can impose a penalty if you fail to deduct, or send remittances beyond the due date.
Register for Online Payroll
It is a good idea to prepare all necessary information before you register online for payroll with the CRA. To register for your payroll account, gather the following information:
- Social Insurance Number (SIN). Income tax return filed with CRA Basic personal information. Basic business information, including your BN. If you are incorporated, you will need your corporate name, certificate numbers, date of incorporation and jurisdiction.
Once you have a payroll account, you will need:
- When employees get their first paycheck. Months in which the payroll covers employees’ wages. Country of parent or affiliate (if applicable). Name of franchisor and country of head office (if applicable).
How to register for an online payroll account
Register for a BN or CRA account in any one of these ways:
- On the Website Registration Online (BRO). By phone at 1-800-959-5555 By mail or facsimile
You must complete the request form if you intend to register by telephone, mail, or fax.
How to Hire Your First Employee, and Calculating Remittances Amounts
After you have registered your online payroll account with CRA and obtained your business number (BN), you can hire new employees, calculate the deductions necessary for remittances on each employee’s behalf and then you can register your business number (BN). First, you will need the Social Security Number of each employee. Next, you will need to file a Personal Tax Credits Return.
The Personal Tax Credits Report form calculates the tax that an individual can deduct from their employment income. The CRA doesn’t require you to submit the provincial or federal forms. However, the employee must complete the forms and keep them in your office.
Either ask your employees to complete paper copies or provide you with a printed copy of the Electronic Form TD1. This form is usually only required once by employees, and it can be used at any time during their employment.
Only if they have to change the amounts of federal or provincial tax credits, or increase the tax deducted from their pay checks, do they ever need to submit another form?
The Personal Tax Credits Report form helps you figure out how much tax to pay for your employee. It also takes into consideration dependents and other factors that can affect the amount of tax an employee owes. Tax time will be easier if your employee gives accurate information.
This form requires your employee to estimate:
- Annual net income Annual pension income Annual tuition fee Dependents’ ages & net income Spouse/common-law partner’s net Income Amounts your dependent(s), use on their income tax return and benefits return Amounts that your spouse or common law partner uses on their return
Employees can also claim using the form:
- Canada caregiver amounts under 18 years old. Canada Disability amounts
The CRA offers TD1WS Worksheet for Personal Tax Credits Return, which assists employees in determining their Canada caregiver amount and appropriate age.
Payroll Tax: Which Provincial or Territorial Tax Tables should you Use?
Employers must be aware of each employee’s province or territory so that you can properly withhold any necessary deductions when you submit your payroll online. This will depend on whether the employee is physically present at your business or establishment.
Your employee might be liable for taxes if they work from home.
An “establishment” of the employer is a place or premises that you, the employer, rent, lease or own in Canada. It’s used for income tax purposes Canadian Pension Plan and Employment Insurance withholding purposes. This is usually where employees report to work, or where they receive their wages. It doesn’t necessarily have to be permanent.
A construction company’s place of business can be any number of construction sites. A carnival’s place of business can also include a parking lot at a shopping center. These examples show that the location of the shopping center parking lot or construction office is determined by the employee’s territory or province of employment.
Your establishment will not accept an employee who reports in person to it. The employee’s territory or province of employment must match that of your office.
While your head office may be in Ontario, you need your employees to report to your business in Manitoba. Use the Manitoba payroll deductions table in this instance.
Your employee may work from home in Alberta, but must report to your Alberta office occasionally. Your head office in Ontario pays your employee. You can use the Alberta payroll deductions table to pay your employee, since they may report to your Alberta office.
If your employee is not required to report to your establishment in person (for instance, if the employment contract states that the employee works remotely), the province or territory where the employee works is the area where their salary and wages are paid. This usually corresponds to the location of your payroll department, or records.
The employee does not have to report to your place of business. However, you can pay them from your Quebec office. Use the Quebec payroll deductions table in this instance. While the employee does not have to contribute to CPP, they may be required to contribute to Quebec Pension Plan (QPP).
Once you have determined the province or territory that you will use to deduct CCP contributions, EI Premiums and income tax, you’ll be able to use the online calculator to calculate the employer share that you must deduct from each pay period. To calculate all the deductions that you must take from your employees’ pay, you will need their completed Personal Tax Credits Form.
You can keep any deductions taken from employees’ pay in trust for receiver general in a separate account to your operating business account, so you have funds available when you need to remit them the CRA.
To avoid late fees, payroll tax deductions must be remitted on time
Employers are responsible for remitting the CPP contributions, EI Premiums and any income tax deducted from employees to the appropriate agency. You must also pay the employer’s share to the CRA for CPP and EI. Late payments of payroll deductions can lead to severe penalties.
1) Determine Your Remittance Due Date
You should identify the payday of your employee. This is not the end of the pay period. This is the date that your employees receive the funds for the previous pay period.
Example: You pay your employee on July 24, but the pay period runs from July 3 to July 16. To calculate the remittance day, you use July 24.
2 Calculate Your Average Monthly Withholding (AMWA).
Use the AMWA calculation
Add the following to the sum for the last two calendar years
AMWA = (CPP+EI + income tax) / The number of months you are required to make payments
Notice: CPP/EI (Both the employer and employee portion)
New Business Example:
Your business is officially opened on January 1, 2019, and your first employee is hired on March 1, 2019. You finally have the opportunity to open your payroll account with CRA in June. Since March 1, 2018, you keep the CPP and EI aside in a separate account to remit income tax to the appropriate agencies.
For four months, you will need to pay: March, April and May. Then, June. You must set aside $5,000.
AMWA = $5000/4
AMWA = $1250
3: Determine Your Remittance Type & Frequency by Using the CRA Table
The table of remitter type from the CRA, with their average monthly withholding amount and due date, can be found at CRA.
Notice: Remittances due on Saturdays, Sundays, and public holidays are due the following business day.
4) Fill out the Remittance forms
Depending on the type of remitter, the CRA will send your small business a customized form to fill out and establish the account. The CRA has a number of forms that can be used to help small business owners file their taxes, such as taxing employees’ wages or calculating sales taxes.
Penalties and Late Remittance
If the following happen, the CRA may impose a penalty
- The amounts are deducted but not remitted to the CRA
- The amounts are deducted, but the remittance is sent late to the correct agency.
These are the consequences:
- 3% on amounts up to three days late, 5% on amounts four or five day late, 7% on amounts six or seven day late
- 10% if the amount is not remitted within seven days.
To avoid penalties and ensure that everyone is paid on time, make sure you correctly set up your payroll online. A trusted payroll software such as Quick Books can help you ensure a smooth payroll setup. Get online payroll now to streamline your payroll process.