Payroll — Montreal CPA Firm Near You: Complete 4-Page Guide to Payroll Accounts, CPP/EI/Tax Deductions, Remittances, Slips, Benefits, Compliance, and CRA Enforcement

Payroll is one of the most sensitive—and heavily audited—areas of Canadian taxation. Whether you have one employee or hundreds, payroll mistakes can trigger penalties, interest, CRA audits, misallocated payments, and even director liability. Every business owner must understand how to correctly determine employment relationships, calculate source deductions, remit payroll on time, and issue compliant T4/T4A slips.

This comprehensive 4-page Mackisen CPA guide explains how payroll works in Canada, how to avoid common errors, how CRA enforces payroll compliance, and how Mackisen ensures businesses are fully protected. Written in a high-authority accounting and tax blogger style with strong SEO and client-conversion structure, this guide is ideal for employers, HR managers, bookkeepers, contractors, and corporations.

Legal and Regulatory Framework

Under the Income Tax Act, Canada Pension Plan (CPP), and Employment Insurance Act (EI), every employer who pays employees in Canada must:

• Determine whether a worker is an employee or independent contractor

• Open and maintain a CRA payroll deductions account

• Obtain and maintain valid employee information (SIN, TD1 forms, province of employment)

• Calculate and deduct income tax, CPP contributions, and EI premiums

• Remit employee and employer portions to the CRA on time

• Keep payroll records for at least six years

• File T4 and T4A information returns accurately and on time

Failure to comply triggers payroll penalties, interest, CRA payroll audits, and potential director liability for unpaid payroll taxes.

CRA enforces payroll compliance aggressively because payroll deductions are trust funds: employers hold them on behalf of the government and employees.

Key Court Decisions Affecting Payroll

Key payroll-related rulings emphasize:

1. The employer is responsible for worker classification.
   If CRA determines a worker is an employee and not a contractor, CRA can reassess the employer for unpaid CPP, EI, and penalties.

2. CPP/EI must be deducted even if employees “agree” otherwise.
   Agreements to avoid deductions are invalid.

3. Benefits must be valued consistently and reasonably.
   Courts uphold CRA assessments for taxable benefits improperly excluded from payroll.

4. Directors are personally liable for unpaid payroll remittances.
   This liability survives corporate dissolution.

5. Misallocated payroll payments remain the employer’s responsibility.
   Employers must correct remittance errors immediately.

These decisions highlight the importance of professional payroll systems and oversight.

Why CRA Targets Payroll

Payroll is one of the CRA’s highest-risk areas because:

• Many businesses misclassify employees as contractors

• Small businesses often miss payroll remittance deadlines

• CPP/EI calculations are frequently incorrect

• Some employers fail to report taxable benefits such as auto allowances, housing, meals, and gift cards

• Late or missing T4/T4A slips trigger CRA penalties

• Misallocated payments cause remittance shortages

• CRA conducts routine payroll audits, especially in construction, restaurants, trucking, professional services, and gig-economy industries

CRA knows payroll errors can generate large penalties quickly—and they enforce aggressively.

Mackisen Strategy

Mackisen CPA Montreal assists businesses with:

• Payroll setup and CRA account registration

• Employee vs contractor classification

• Secure monthly or biweekly payroll processing

• CPP/EI and income tax deduction calculations

• Setting up remittances and confirming CRA received payments

• Preparing and filing T4/T4A slips and summaries

• Correcting payroll errors and misallocated remittances

• Representing clients during CRA payroll audits

• Advising on taxable benefits and compliance

• Payroll planning for bonuses, shareholder payments, and vacation pay

Our systems prevent costly penalties, streamline payroll processes, and ensure full compliance.

Real Client Experience

A Montreal tech startup misclassified developers as contractors. CRA conducted a payroll audit and assessed nearly $60,000 in CPP, EI, penalties, and interest. Mackisen negotiated a reduction and restructured their payroll system.

A restaurant owner frequently remitted payroll late. CRA charged monthly penalties. Mackisen implemented automated payroll withdrawals and erased repeated-late penalties under taxpayer relief.

A contractor issued incorrect T4A slips to subcontractors. CRA demanded corrections. Mackisen amended slips, updated bookkeeping, and avoided further enforcement.

A corporation’s payroll payment was misallocated to GST/HST. CRA threatened collections. Mackisen fixed the allocation and secured reversal of late penalties.

What’s New and Updated for Payroll

CRA updates payroll requirements annually. Key changes include:

• Revised CPP/QPP contribution rates

• Updated EI premiums

• Annual changes to TD1 forms

• New taxable benefit rules (e.g., parking, work-from-home allowances, employer-paid costs)

• Updated automobile benefit rates

• Changes in eligibility for digital or cash benefits

• New CRA online tools and automation options

Employers must stay informed to avoid incorrect deductions.

Determine the Relationship With the Employer or Payer

Before paying a worker, employers must determine whether the worker is:

• An employee

• A subcontractor

• A personal services business

• A self-employed contractor

CRA applies factors such as:

• Degree of control

• Ownership of tools

• Chance of profit versus risk of loss

• Integration in the business

Misclassification creates major payroll liabilities.

Open or Manage a Payroll Account

You must open a payroll deductions account if:

• You pay employees

• You pay yourself as a shareholder-employee

• You provide taxable benefits

• You withhold CPP/EI on payments to contractors reclassified as employees

You can open, modify, or close the account through:

• CRA My Business Account

• Represent a Client

• Phone or mail

You must keep the account up to date when:

• Changing ownership

• Changing address

• Hiring or terminating employees

• Changing pay frequency

Set Up and Manage Employee Payroll Information

Before paying employees, employers must:

• Obtain Social Insurance Number (SIN)

• Determine province of employment

• Obtain TD1 and TD1 provincial forms

• Set up deductions

• Determine taxable benefits

• Decide whether to increase or decrease tax withheld

Employers must maintain accurate employee records at all times.

Calculate Payroll Deductions and Contributions

Employers must correctly calculate:

• CPP contributions

• EI premiums

• Income tax deductions

CRA tools include:

• Payroll Deductions Online Calculator (PDOC)

• T4032 Payroll Deductions Tables

Employers must also determine:

• Whether benefits are taxable

• How to calculate automobile benefits

• Special payment rules for bonuses, severance, vacation, retroactive pay, and allowances

Remit (Pay) Payroll Deductions and Contributions

When to remit:

• Monthly

• Quarterly (if eligible)

• Accelerated remitter (for large payrolls)

Payment methods:

• Online banking

• CRA My Business Account

• Pre-authorized debit

• Canada Post (QR code)

• Wire transfer (non-residents)

Missing remittances generate:

• Penalties (up to 20%)

• Daily compound interest

• CRA collections action

File Payroll Information Returns (Slips and Summaries)

Employers must:

• File T4 and T4A slips by February 28

• Distribute slips to employees

• Amend or cancel slips as needed

• Avoid filing duplicates unless CRA rejects submissions

Penalties for late or incorrect T4 filings can be substantial.

Payroll Compliance and Enforcement

CRA payroll audits review:

• Worker classification

• Payroll records

• CPP/EI deductions

• Taxable benefits

• Remittance history

• T4 and T4A accuracy

Audits may lead to:

• Reassessments

• Penalties

• Director liability

• Legal enforcement

Mackisen represents clients during audits to reduce risk and penalties.

Receiving Payroll Correspondence

Employers may receive CRA correspondence regarding:

• Remittance discrepancies

• CPP/EI rulings

• Payroll audits

• Missing filings

• Misallocated payments

• Benefit and taxable allowance reviews

Responding promptly avoids escalation.

Common Questions

Do all employers need a payroll account?
Yes—if you pay employees or taxable benefits.

Are payroll deductions refundable if overpaid?
Yes, through corrected filings.

What happens if I don’t remit payroll tax?
Interest, penalties, collections, and director liability.

What if CRA says my contractor is actually an employee?
You may owe CPP, EI, and penalties retroactively.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses stay fully compliant with payroll rules, avoid CRA penalties, and protect business owners from costly mistakes. Whether you need payroll processing, CRA audit defense, help with slips, remittances, or worker classification, our expert team ensures your payroll is done right—every pay period, every year.