If you miss a CRA payroll remittance deadline, you face a penalty starting at 3% of the amount due and rising to 10% based on how late you are, plus daily compounding interest. Repeat failures in the same year can be penalized at 20%. Directors can be held personally liable for unremitted amounts.
Payroll source deductions, the CPP, EI and income tax you withhold from employee pay, are considered trust funds. The CRA takes them more seriously than almost any other balance a business owes, because the money was never yours to begin with. That is why the penalties escalate quickly and why directors can be held personally responsible. At Gondaliya CPA, we run payroll and remittances for businesses so the deadline is never missed, with payroll starting at $125 per month for the first employee.
The Penalty Tiers for Late Remittance
The penalty depends on how many days late the remittance is. It applies to the amount you were required to remit, not your whole payroll.
| How Late | Penalty Rate |
|---|
| 1 to 3 days late | 3% |
| 4 to 5 days late | 5% |
| 6 to 7 days late | 7% |
| More than 7 days late, or not paid | 10% |
| Second failure in the same year (with gross negligence) | 20% |
On top of the penalty, the CRA charges interest on the overdue amount, compounded daily, from the day after the due date until the balance is paid. The interest rate is set quarterly and applies to both the unremitted deductions and the penalty itself.
Director Liability: Unremitted source deductions are not just a corporate debt. Under the Income Tax Act, directors can be held personally liable for the unremitted amounts, penalties and interest. The corporation being unable to pay does not protect the director.
Why the CRA Treats This So Seriously
When you withhold CPP, EI and income tax from an employee's pay, that money belongs to the government and your employees, not to the business. Holding it back, even briefly, is treated as withholding trust funds. This is why a late payroll remittance is penalized far more aggressively than, for example, a late HST or corporate tax payment of the same size.
- The penalty is a percentage of the remittance, so a large payroll means a large penalty even for being a few days late.
- Interest compounds daily, so the cost grows every day the balance is outstanding.
- Repeated lateness signals a pattern to the CRA and can trigger the 20% penalty and closer scrutiny.
- Persistent failure can lead to the CRA requiring a director to remit personally.
What to Do If You Have Already Missed the Deadline
If you have missed a remittance, the worst thing you can do is wait. Acting quickly limits the damage because both the penalty tier and the interest grow with time.
- Pay as soon as possible. Even a few days earlier moves you to a lower penalty tier and stops further interest.
- Pay the full amount if you can. Partial payments still leave a penalty and interest running on the remainder.
- Confirm the correct remitter frequency. Many penalties come from remitting on the wrong schedule, not from inability to pay.
- Consider taxpayer relief. If the lateness was due to circumstances beyond your control, the CRA may cancel or waive penalties and interest on request.
- Fix the system. Most missed remittances are a process problem. Automating payroll prevents it from happening again.
Case Study: Mississauga Contractor
A small contractor in Mississauga missed two payroll remittances during a busy season and was facing a 10% penalty plus mounting daily interest, with the CRA beginning to raise director liability. We brought the remittances current immediately, filed a taxpayer relief request citing the circumstances, and moved them onto automated monthly payroll. Part of the penalty was waived and the lateness has not recurred.
Remittances brought current. Relief filed. Automated going forward.
How to Never Miss a Remittance Again
Almost every missed remittance is a process failure, not a cash failure. When payroll and remittances are automated and handled by your accountant, the deadline simply takes care of itself. Our payroll services include calculating, remitting and filing on time, every period, so penalties stop being a risk. Payroll starts at $125 per month for the first employee, with HST included.
Frequently Asked Questions
What happens if I miss my payroll remittance deadline?
You face a penalty starting at 3% of the amount due and rising to 10% based on how late you are, plus daily compounding interest. A second failure in the same year can be penalized at 20%, and directors can be held personally liable.
How much is the late remittance penalty?
3% for 1 to 3 days late, 5% for 4 to 5 days, 7% for 6 to 7 days, and 10% for more than 7 days late or not paid. A repeat failure with gross negligence is 20%.
Is the penalty on my whole payroll or just the remittance?
It applies to the amount you were required to remit, the withheld CPP, EI and income tax plus the employer portions, not your entire payroll.
Does the CRA charge interest as well as the penalty?
Yes. Interest is charged on the overdue amount, compounded daily, from the day after the due date until paid. It applies to both the unremitted deductions and the penalty.
What are payroll source deductions?
The CPP contributions, EI premiums and income tax you withhold from employees, plus the employer share of CPP and EI. These are remitted to the CRA on a set schedule.
Why are payroll penalties higher than other CRA penalties?
Withheld deductions are trust funds that belong to the government and your employees, not the business. The CRA treats holding them back far more seriously than a late HST or corporate tax payment.
Can I be personally liable as a director?
Yes. Under the Income Tax Act, directors can be held personally liable for unremitted source deductions, penalties and interest if the corporation does not pay.
When are payroll remittances due?
It depends on your remitter type. Regular remitters pay by the 15th of the month after you paid employees. Quarterly, accelerated and threshold remitters have different schedules based on your average monthly withholdings.
What is a remitter type?
The CRA assigns a remitter frequency, quarterly, regular, or accelerated, based on your average monthly withholding amount. Larger payrolls remit more often. Using the wrong frequency causes many late penalties.
What if I remit on the wrong schedule?
Remitting on a slower schedule than required is treated as late and triggers penalties even if you intended to pay. Confirming your correct remitter frequency prevents this.
What should I do right after missing a deadline?
Pay as soon as possible, ideally the full amount, because each day moves you up the penalty tiers and adds interest. Then confirm your remitter frequency and fix the process so it does not recur.
Can the penalty be reduced or waived?
Possibly. Through the Taxpayer Relief Program, the CRA may cancel or waive penalties and interest if the lateness was caused by circumstances beyond your control, such as illness, disaster or CRA error.
How do I apply for taxpayer relief?
You file Form RC4288, Request for Taxpayer Relief, explaining the circumstances and providing support. We prepare and file these requests for clients.
Tax Debt Help →Does a partial payment help?
It reduces the balance that interest runs on, but a penalty and interest still apply to the unpaid portion. Paying in full as early as possible is always cheapest.
What if I cannot afford to remit?
Contact the CRA before the deadline if possible. A payment arrangement may be available, but penalties and interest still apply. We can help negotiate with the CRA.
CRA Collections Help →Will one late remittance trigger an audit?
One isolated late remittance usually does not. A pattern of lateness draws CRA attention and can lead to closer review, the 20% penalty and director liability action.
How is the 20% penalty triggered?
It applies to a second or further failure to remit on time in the same calendar year where the failure was made knowingly or through gross negligence.
Does the penalty apply to nil remittances?
If you have no remittance for a period, you should still notify the CRA you are nil. Failing to report can cause the CRA to estimate an amount and assess penalties on it.
Can I remit early to be safe?
Yes. Remitting before the due date is always fine and is the simplest way to avoid any risk of a late penalty.
How do I remit to the CRA?
Through CRA My Business Account, online banking, at your financial institution, or via your payroll provider. Automated payroll handles the remittance for you each period.
Does outsourcing payroll prevent missed deadlines?
Yes. When your accountant calculates and remits each period, the deadline is managed for you. This is the most reliable way to eliminate late penalties.
Payroll Services →How much does payroll service cost?
Payroll starts at $125 per month for the first employee, with additional employees added at a per-employee rate. All fees include HST.
Do you handle the remittances or just the calculations?
Both. We calculate source deductions, remit them to the CRA on time each period, and file your T4s and required returns at year-end.
What records should I keep for remittances?
Keep your remittance confirmations, payroll registers, and the CRA statements showing amounts and dates. These support you if a discrepancy or relief request arises.
Can the CRA take money directly if I do not pay?
Yes. For unremitted source deductions the CRA has strong collection powers, including garnishing bank accounts and pursuing directors personally, often without a court order.
What if I made an error in the remittance amount?
If you under-remitted, pay the difference promptly to limit penalty and interest. If you over-remitted, it can be applied to a future period or refunded. We reconcile these for clients.
Are fees inclusive of HST?
Yes. All quoted fees include HST, so the number you are quoted is the number you pay.
How do I pay your fees?
Payment is by Interac e-Transfer to info@gondaliyacpa.ca. Auto-deposit is enabled, so no security question is needed.
Do you serve businesses outside Toronto?
Yes. We handle payroll and remittances for businesses across the GTA and all of Ontario and Canada virtually, with the same flat-fee pricing.
How do I get started?
Book a free consultation or use our fee calculator. We review your payroll, confirm your remitter frequency, and take over so deadlines are never missed again.
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