What are Payroll Deductions and Remittances?

According to CRA, an employer is responsible for paying salaries and benefits to his employees. Therefore, if you meet these criteria, CRA expects you to compute, deduct and remit source deductions for each payroll you provide to employees.

Deductions from Employee's Payroll:

The deductions from employee's payroll include the following programs:

• Income Tax is dependent on your provincial rates.
• Employment Insurance premiums up to a yearly maximum.
• Canada Pension Plan (CPP) contributions up to an annual maximum.

What Is A PD7A Form?

The PD7A is a payroll remittance form used by the CRA. Employers report Employment Insurance premiums, CPP contributions, and federal income tax deducted from your employee's pay. The CRA issues this form to eligible regular, quarterly, and expedited remitters.

PD7A Form: Overview

CRA distributes 11.5 million of these forms to 1.6 million remitters. The cost of producing the PD7A in 2009, including paper, envelopes, salaries, and postage, was estimated to be around $7.6 million. Over the last few years, costs have been progressively growing.

Three Sections of PD7A Forms:

1. Remittance Account Balance
2. Account Summary
3. NIL Remittance

1. Remittance Account Balance:

This section includes the total paid and unpaid estimated payments for the year.

2. Account Summary:

This section includes all the transactions that have taken place after the last report you submitted. This part of the statement may contain any of the following:

• Transfer of Account Balances
• Arrears Account Balances
• Explanation of Changes and other important Informtion

Transfer of Account Balances:

It is a year-to-date record of the payment you sent to CRA on your employees' behalf.

Arrears Account Balances:

This statement includes the record of late payments or missing contributions. If you have to submit late payments, do not use remittance vouchers attached to PD7A, instead, click "Make a payment to CRA' or use the source deductions arrears remittance voucher (PD7D).

Explanation of Changes and other Important Information:

This section includes the details of the modifications or corrections made to your account in a written form.

3. NIL Remittance:

PD7A form also includes a Nil Remittance form used to inform CRA if you no longer have employees for a specific amount of time or if you want to close your account.

Why Do You Need To Fill PD7A Forms?

You need to fill out PD7A forms because you run a business with employees. You as an employer are responsible for sending deductions from Canada Pension Plan (CPP), Employment Insurance premiums, and income tax to CRA on their behalf.

What is a Criteria of PD7A Forms?

It is essential to mention correct details as incorrect information will only lead to penalties. To fill PD7A form, you need to say:

• Account numbers
• Gross payroll
• Number of employees
• Cheque number
• Date of your remittance
• Amount of tax
• Canada Pension Plan (CPP)
• Employment Insurance (EI)

What Information of Employees Needed To Fill The Form?

To fill PD7A form on behalf of your employees, you need to fill in the following information of employees:

• First/Last name
• Date of birth
• Home address
• Employment province
• SIN
• Email
• The Hire date
• Territorial/Provincial and Federal TD1 Forms
• Pay group
• Pay type
• Pay rate

Remittance Schedule for Payroll Deductions:

The remittance schedule for payroll deductions depends on your company's average monthly withholding amount (AMWA) 

This is a total of all payroll deductions made to the CRA during the annual year, then averaged monthly.

Sections of Remitting Payroll:

The CRA assesses your company as a new, regular, or quarterly remitter based on the two-year history of AMWA.

1. New Remitter
2. Regular Remitter
3. Quarterly Remitter

1. New Remitter:

Someone who is a new employer or has never transferred payments before is included in this section. Payments are due on the 15th day of the month following the one in which the deductions were made.

2. Regular Remitter:

Employers with less than two years of AMWA experience or a two-year history of less than $25,000 in revenue are included in this remitter. Payments are due on the 15th of the month to the month deductions are made.

3. Quarterly Remitter:

This includes employees with small businesses with AMWA of less than $3,000 in the past two years. Payments are due by April 15th, July 15th, October 15th, and January 15th for payroll issued in the preceding quarter; the quarter status is evaluated yearly.

Submit Payments On Time To Avoid Penalties:

If you want to avoid any penalties, make sure you submit the payment on time with the correct information required. Your payroll source deductions must also be sorted in a trust account separate from your primary operating fund.

What Are The Penalties For Late Payments?

• Penalty on 1-3 days late payment is 3%
• Penalty on 4-5 days late payment is 5%
• Penalty on 6-7 days late payment is 7%
• Penalty on more than seven days late payment is 10%
• Penalty on constant failures and irregularities is 20%

Bottom Line:

Payroll remittance is a time-consuming and complex process that all employers must go through regularly. Due to the process's complexity, it's common to misunderstand it, skip a stage, submit your remittance after it's due, and make various other mistakes. These errors are difficult to repair without paying the price and wasting time correcting them. So it's better to submit the payments to the CRA on time to avoid penalties you will have to face. On the other hand, suppose you want to improve your payroll remittance system. In that case, you can contact Yogi & Associates as our qualified consultants can help you calculate deductions without any errors, which will help you save your time and a headache in the process.