Payroll Mistakes That Trigger CRA Problems

Payroll is one of those areas of running a business where small mistakes can quickly become bigger problems.

It’s not just about making sure your employees get paid on time. Employers also have responsibilities when it comes to deductions, remittances, records, and reporting to the Canada Revenue Agency (CRA).

The good news? Many payroll problems are preventable with the right processes in place.

Here are some common payroll mistakes to watch for—and what you can do to avoid them.

1. Missing or Miscalculating Payroll Deductions

Every paycheque involves more than an employee’s gross pay. Depending on the situation, employers may need to deduct income tax, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums.

Using outdated information or calculating deductions incorrectly can result in under- or over-remittances.

Payroll calculations can also become more complicated when you have changes in an employee’s pay, bonuses, benefits, or employment status.

The best way to avoid issues is to use up-to-date payroll tools and make sure your calculations are being reviewed regularly.

2. Missing Your Remittance Deadlines

One of the most common payroll mistakes is simply forgetting to remit deductions on time.

Employers are responsible for sending the amounts they deduct from employees’ pay, along with the employer portions where applicable, to the CRA according to their assigned remittance schedule.

Missing a deadline can result in penalties and interest, even if the amount owing is relatively small.

Your remittance schedule depends on your business, so make sure you know which schedule applies to you and have a process in place to ensure payments are made on time.

3. Keeping Incomplete Payroll Records

Payroll records need to be accurate and properly maintained.

That includes information such as employee earnings, deductions, benefits, and remittances. If your records are incomplete or difficult to track, it can make year-end reporting—and responding to questions from the CRA—much more difficult.

Keeping organized records throughout the year is much easier than trying to reconstruct them later.

4. Forgetting About Taxable Benefits

Not every form of employee compensation looks like a traditional paycheque.

Certain benefits or allowances provided to employees may be considered taxable benefits and need to be included in their income.

If you’re providing employees with things like personal use of a company vehicle, certain allowances, or other benefits, make sure you understand how they should be treated for payroll purposes.

When in doubt, it’s better to ask before processing payroll rather than trying to correct an issue later.

5. Treating Payroll as a “Set It and Forget It” Task

Payroll processes that worked when you had two employees may not work as well when you have 20.

As your business grows, your payroll responsibilities can become more complicated. New employees, changing compensation, bonuses, benefits, and different types of workers can all introduce new considerations.

Regularly reviewing your payroll process can help catch issues before they become costly.

Keep Payroll Problems From Becoming Bigger Problems

Payroll compliance doesn't have to be complicated, but it does require consistency and attention to detail.

Keeping accurate records, staying on top of remittance deadlines, and reviewing payroll changes can go a long way toward avoiding unnecessary CRA issues.

If you’re unsure whether your payroll process is keeping up with your business, Onyx Accounting can help. Contact us to discuss your payroll and accounting needs and make sure you have the right systems in place.