Setting Up a CRA Payroll Account – A Complete Guide by a Montreal CPA Firm Near You

Introduction

If you are hiring your first employee in Canada—whether full-time, part-time, contract-to-hire, casual, or even a family member—you must register for a CRA Payroll Program Account before issuing your first paycheque. This account allows you to withhold and remit income tax, CPP, and EI to the Canada Revenue Agency. Many businesses don’t realize that paying an employee without a payroll account is a serious violation that triggers CRA penalties, late remittance interest, and payroll audits. Whether you run a new corporation, a sole proprietorship expanding its operations, or a growing company hiring additional staff, understanding how to set up a CRA payroll account correctly is essential.

Legal and Regulatory Framework

Payroll registration requirements fall under the Income Tax Act, Canada Pension Plan Act, Employment Insurance Act, and CRA administrative rules. Employers must:

• register for a Payroll Program (RP) account before the first payday
• collect TD1 forms (federal and provincial) from employees
• withhold income tax, CPP, and EI
• remit deducted amounts and employer portions by CRA deadlines
• file T4 slips and summaries at year-end
• maintain payroll records for six years

A payroll account is identified by Business Number (BN) + RP extension, such as:
12345 6789 RP0001

This regulatory structure defines the process for opening and maintaining a payroll account in Canada.

Key Court Decisions

Several court rulings reinforce employer obligations regarding payroll accounts and remittances:

1. Soper v. Canada

The court held directors personally liable for unremitted payroll deductions, underscoring the importance of establishing proper payroll systems from the start.

2. Hickey v. Canada

The business argued that payroll errors were administrative. The court upheld CRA penalties, confirming that payroll obligations are strict and non-negotiable.

3. Royal Winnipeg Ballet v. Canada

Incorrect classification of workers resulted in incorrect payroll reporting—leading to large reassessments.

4. ConCreate USL Ltd. v. Canada

Improper or late payroll filings triggered CRA intervention; the court supported strict compliance requirements.

These cases show that CRA expects employers to meet all payroll obligations—including proper registration—without exception.

Why CRA Targets This Issue

CRA audits payroll accounts because payroll deductions are considered trust funds. CRA looks for:

• employers paying staff without a payroll account
• missed or late payroll remittances
• unreported taxable benefits
• misclassified employees treated as contractors
• T4/T4A inconsistencies
• repeated changes in payroll frequency
• payroll accounts registered late or not at all

CRA also cross-checks GST/HST, T2 corporate returns, bank statements, and ROE filings with payroll activity. Any inconsistency can initiate a payroll audit.

Mackisen Strategy

At Mackisen CPA Montreal, we set up payroll accounts quickly, correctly, and in full compliance. Our structured approach includes:

1. Business Number (BN) Verification

• ensuring your business is registered federally or provincially
• confirming your CRA accounts (BN, GST/HST, import/export)

2. Registering Your Payroll Account (RP)

We complete the payroll account setup using:
• CRA My Business Account
• telephone registration (if urgent)
• RC1 form (if manual application is required)

We ensure:
• proper RP0001 assignment
• payroll frequency and pay period selection
• first payday validation
• employee count projection

3. Employee Setup

We help you:
• obtain and store TD1 federal and provincial forms
• validate SIN numbers
• set salary/wage structure
• configure payroll software (QuickBooks, Wagepoint, ADP, Ceridian, etc.)

4. Remittance Schedule Setup

We determine whether you are a:
• regular remitter
• quarterly remitter
• accelerated remitter

We then establish:
• automated reminders
• CRA direct debit setup
• remittance workflow integrated with bookkeeping

5. Compliance & Audit Protection

We ensure:
• CPP/EI calculations match CRA tables
• taxable benefits are tracked
• ROEs, T4s, and RL-1s (Quebec) are prepared accurately
• payroll account stays compliant year-round

This protects your business from costly payroll penalties.

Real Client Experience

A new Montreal tech startup hired employees but forgot to register a payroll account. CRA assessed backdated payroll deductions with penalties. We registered the payroll account retroactively, corrected filings, and reduced penalties through a relief request.

Another client registered for payroll but failed to collect TD1 forms. CRA raised concerns during an audit. We corrected documentation, trained staff, and avoided reassessment.

A growing construction company miscalculated payroll taxes because the payroll account was set up incorrectly. We rebuilt their payroll system, set correct remittance frequencies, and resolved payroll discrepancies.

Common Questions

Employers often ask whether a payroll account is needed for contractors. No—only employees require payroll accounts.

Others ask whether you must register before or after hiring. Before—you cannot legally pay employees without an RP account.

Some ask whether directors need T4s. Yes—if they receive salary.

Another question: Do family employees require full payroll? Yes—unless legally exempt (rare cases).

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal ensures businesses set up and manage payroll accounts accurately and efficiently. Whether hiring your first employee or expanding your workforce, our expert team ensures full CRA compliance and provides complete payroll support.