An Ontario Employer's Payroll Remittance Obligations to the CRA, Explained

Every time you run payroll, you're not just paying your employees — you're also collecting money on the CRA's behalf. Payroll remittance obligations exist the moment you withhold a dollar of income tax, CPP, or EI from an employee's pay, and the law treats that withheld amount very differently from ordinary business cash.

Understanding why matters more than it might seem. Employers who treat remittances as just another bill to pay when cash flow allows sometimes discover, too late, that this particular obligation follows the business — and sometimes its directors — much more aggressively than an ordinary supplier invoice would.

Why Withheld Amounts Are "Trust Funds," Not Business Cash

When you withhold income tax, CPP contributions, and EI premiums from an employee's paycheque, that money is considered held in trust for the federal government from the moment it's deducted. It was never really yours to begin with — you're a collector, not the owner, of those funds.

This distinction has teeth. Ordinary business creditors generally rank behind other claims if a business runs into financial trouble. Amounts held in trust for the CRA are treated differently, and the CRA's collection powers over unremitted trust amounts are correspondingly stronger than those of a typical unsecured creditor.

What You're Actually Required to Remit

The total remittance bundles all of these together and goes to the CRA under your payroll program account, on the schedule the CRA has assigned to you based on your withholding volume.

Remittance Timing Isn't Flexible

The CRA sets remittance deadlines by remitter type, and the deadline applies regardless of whether you've actually paid your employees that period in full or on time. A cash-flow crunch doesn't extend the remittance deadline — the withheld amounts were never available for you to use for other expenses in the first place, even if the practical reality is that a struggling business sometimes dips into them.

If you're genuinely unsure what remittance frequency applies to your business, that's a question for your accountant or the CRA directly — don't guess based on what a similarly sized business down the street is doing.

What Happens If Remittances Fall Behind

Unremitted source deductions accrue interest, and the CRA can assess penalties on top of the amount owing. The CRA's prescribed interest rate on amounts owed changes from quarter to quarter, so don't rely on a rate you saw last year or heard from another business owner — verify the current rate before estimating what falling behind will actually cost.

Beyond interest and penalties, the CRA has strong collection tools available for unremitted trust amounts, including the ability to assess the business directly for the shortfall without going through the same process it would use for an ordinary disputed tax bill.

Director's Liability: Why Incorporating Doesn't Fully Shield You

One of the most important things for an owner-manager to understand is that incorporating your business does not fully insulate you personally from unremitted payroll deductions. Directors of a corporation can become personally liable for the corporation's unremitted source deductions — and separately, for unremitted GST/HST — if the corporation fails to remit them. This is commonly called director's liability.

This is a narrower exception to the general principle that a corporation is a separate legal person from its directors, and it exists specifically because of the trust-fund nature of the amounts involved. Directors facing potential personal exposure on unremitted payroll amounts should get legal advice early, not after the CRA has already moved to collect.

Misclassifying Employees as Contractors Doesn't Solve the Problem

Some employers try to avoid the remittance regime entirely by treating workers as independent contractors rather than employees. The CRA and the courts look at the substance of the working relationship — control over the work, who owns the tools, whether the worker has a genuine chance of profit or risk of loss, and how integrated the worker is into the business — not what the contract calls the arrangement.

If a worker you've treated as a contractor is later found to be an employee, you can be reassessed for the source deductions that should have been withheld all along, plus penalties and interest. Misclassification doesn't reduce your remittance exposure — it just delays and compounds it.

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