Payroll: Tips, Traps, and Other Considerations

Calgary payroll accounting firm

This article will provide an overview of payroll, a consideration for any business operating in Canada that pays the owners or employees.

Who Needs a Payroll Account?

If you pay salaries, wages, bonuses, or provide taxable benefits (such as automobile benefits), you require a payroll account and a payroll number for your corporation, partnership, or proprietorship.


If you are doing a regular payroll (monthly or bi-weekly, for example), you need to register for the payroll account before your first pay period. Typically, your accountant can set this up for you, or you can call CRA business line and set this up for your corporation.

If your accountant declares a salary once a year, when the year end is completed they will typically have already set up the payroll account and will give you a schedule for remittances required for the remainder of the year.

Calculating Source Deductions

When an individual is paid a salary from a business, the business must take the gross amount of pay, deduct “source deductions”, and pay the individual (whether the employee or yourself) the net amount. Source deductions are made up of three components:

Canada Pension Plan (CPP) contributions: All individuals over the age of 18 and below the age of 65 generally must remit CPP related to the gross pay above $3,500 per annum. This is calculated based on a percentage of the gross pay. There is a matching employer portion that must also be remitted, up to a maximum possible contribution per year. The percentages and maximums change year to year.

Employment Insurance (EI) premiums: Except for shareholders and family members, most individuals have to pay EI premiums based on a percentage of gross pay, to a maximum possible premium per year. There is also an employer portion of the premium. The percentages and maximums change year to year.

Income tax: Based on the employee TD1 forms, or by advice of your accountant, all individuals should remit the employee portion of income tax based on the gross pay. This is calculated based on payroll tables (or through a payroll calculator).

The employee and employer portions would be calculated and remitted to the government. The CRA provides a payroll calculator found at the link below which can aide in these calculations.

How and When to Remit Source Deductions

Most businesses would be classified as a “regular remitter,” in which case the remittance needs to be remitted to the CRA by the 15th of the month following the month when the payroll occurred. In certain cases, a business may fall into being an accelerated remitter if the average monthly withholding amount exceeds $25,000. In this case, remittances are due more frequently, depending on the date the pay occurred. For most small businesses this would not be a concern.

To remit to the payroll account, this can be done by sending a cheque to the CRA with a payroll remittance voucher, paying online through “CRA My Payment” service, or paying through your online banking.

How to File

On a calendar year basis, T4 summaries and T4 slips need to be filed to the CRA by the end of February of the following year. These forms containing the details of the payroll that occurred during the year, and the amount of source deductions that were required to the remitted to the government. The CRA will take this information and apply the filed T4 slips to the employees’ individual tax accounts for purposes of matching to their income tax returns.

If you are not using a payroll provider that does this service for you, we would recommend engaging with an accountant to help with this process, as there could be costly penalties that apply if the filings are done incorrectly or late.

When to Use a Payroll Provider

At Kapasi & Associates, we generally recommend that if a business is employing five or more staff, it makes sense to use a payroll provider. If payroll is done incorrectly, it can lead to costly errors. Companies such as ADP have invested significant resources in creating online platforms to make payroll an efficient and painless process for most organizations. They also have help centres to support you if questions arise. Typically, the cost of this service is nominal compared to the potential time saved and mitigation of errors.


This is just a basic overview of payroll in Canada, and there are numerous other complexities that can arise, particularly when making special types of payments and certain exemptions for source deductions. We recommend discussing your business situation and needs with us to ensure you are compliant with all payroll requirements.

GST: Tips, Traps, and Other Considerations

Wondering if you need a GST number, who should register for one or if you need a business number to get a GST number?

This article will provide an overview of GST/HST, a consideration for most businesses operating in Canada. Note that provincial sales tax (PST/QST) will not be discussed. If you are operating outside of Alberta, PST/QST may also be a consideration for your business.

Who Needs a GST/HST Number?

If you sell goods or provide services in Canada, you are required to collect sales tax from your customers. This applies whether you are a corporation, sole-proprietorship, or partnership. There are some common exceptions (including exempt or zero-rated supplies) where charging sales tax, and therefore opening a GST/HST number, is not required. Major exceptions include:

-Small suppliers (earning less than $30,000 in four consecutive quarters or a single quarter)

-Residential real properties (note that this is a complex area and often requires professional guidance)

-Health care (medical practitioners and medical devices)

-Education services

-Child and personal care

-Legal aid

-Financial services

-Exports out of Canada

-Basic groceries

The rules around the exceptions can be complex and we recommend talking to us to ensure we look at all the considerations that apply to your business.


If you start a business, whether it is a corporation, sole-proprietorship, or partnership, you would register for a GST/HST account with CRA. Registration can be done over the phone or online with CRA. As part of the business start-up process this may or may not have been done for you by your lawyer or accountant.  You are then provided with a GST/HST number effective as of a certain date that you registered. Backdating is typically only allowed up to one month.

This GST/HST number is usually the same as your business number, except with RT 0001 at the end. As a corporation, you would typically register for your GST/HST number at the same time as your business number.

It is recommended that if a business anticipates having to charge sales tax in the future, a GST/HST number is registered, and sales tax is charged as early as possible to avoid forgetting to register later and facing penalties as a result. If you register, you must charge sales tax, even if you continue to meet the small supplier threshold indicated above.

How to Charge Sales Tax

When invoicing customers or clients, your GST/HST number, name of the customer/client, date of the transaction, amount and sales tax charged, and description of the services provided are all required on the document.

A rate of 5% should be used in Alberta, and in provinces with HST, the rate that is applicable in that province should be charged on the subtotal. If you are providing services or selling goods in another province with HST, that applicable rate must be charged, even if you are incorporated in Alberta.

Claiming Input Tax Credits

As a business that charges sales tax, you also have the ability to claim back the GST/HST you paid to your suppliers as input tax credits. This offsets the sales tax you have to remit to the government. If you are using a bookkeeping software it will often have a function to track sales tax on both the income earned and the expenses incurred to run your business. You will have to set up the GST/HST rate, and choose to apply GST/HST to those transactions where GST/HST has been collected and those where GST/HST has been paid. Note that forgotten input tax credits can always be claimed in future filing periods.

How to File

The accountant will typically file the GST/HST return when the year end compilation and tax returns are completed. This is often preferred and usually the most cost effective because of other adjustments the accountant prepares during the year end process.

Most businesses should be set up for annual filing (due three months after year end) unless they earn over $1,500,000 in annual sales. In this case the filing is required to be quarterly, or in the case of being over $6,000,000 in annual sales, monthly, both of which have filing due dates one month after the period end.

GST/HST Quick Method

The GST/HST Quick Method is an election for businesses with less than $400,000 in sales in a year. It is made with CRA and allows the actual GST/HST filing to be based on a calculation which excludes having to track and claim the input tax credits. In many cases for consultants, technical, and project professionals this election will save time and real tax dollars at the end of the day. Whether this is desirable for your business depends on specific circumstances and we recommend you talk to us for more details.


This is just a basic overview of GST/HST, and there are numerous complexities that can arise, particularly on real estate and certain exempt service transactions. We recommend discussing your business situation and needs with us to ensure you are compliant with GST/HST requirements.