Late Payroll Remittance Penalty Calculator 2026
The penalty on a missed source deduction remittance steps up on day four, day six and day eight. Work out exactly what you owe today, what waiting costs, and where the directors become personally liable for the amount.
total payable
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How the Amount Is Built
| Item | Basis | Amount |
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The Band You Fall Into
| How Late | Rate | Penalty on Your Amount | Your Band |
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What Waiting Costs
| If Payment Arrives | Days Late | Rate | Penalty and Interest | Total Payable |
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What This Exposes Beyond the Penalty
What to Do Next
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Disclaimer: This calculator applies subsection 227(9) of the Income Tax Act, the CRA prescribed interest rates from 2018 onward compounded daily, and section 227.1 on director liability. The 20% rate requires both a second or later failure in the same calendar year and a finding that the failure was made knowingly or in circumstances amounting to gross negligence, which the CRA must establish. Interest on the penalty itself from the date of assessment is not included. Provincial payroll obligations, WSIB, the separate failure to deduct penalty under subsection 227(8) and Quebec source deductions are not included. This page is general information, not tax advice.
The Penalty Steps Up Three Times in Eight Days
Most CRA penalties accrue gradually. This one does not. Subsection 227(9) sets a flat percentage of the whole remittance, and the percentage jumps at day four, day six and day eight. A remittance paid on day three costs 3%. The same remittance paid on day four costs 5%.
| How Late the Remittance Is | Penalty | On $50,000 |
|---|---|---|
| 1 to 3 days | 3% | $1,500 |
| 4 to 5 days | 5% | $2,500 |
| 6 to 7 days | 7% | $3,500 |
| More than 7 days, or never remitted | 10% | $5,000 |
| Second failure in the year, knowingly or through gross negligence | 20% | $10,000 |
One day can be worth thousands. On a $50,000 remittance, moving the payment from day four to day three saves $1,000, and from day eight to day seven saves $1,500. If the money can be found today rather than tomorrow, find it today.
The Date That Counts Is the Date the CRA Receives It
The penalty is applied by reference to when the CRA has the money, not when you sent it. A payment made through online banking or at a financial institution on the due date is on time. A cheque posted on the due date is late, and a payment made after banking hours can be processed the following business day.
Where the due date falls on a Saturday, Sunday or public holiday, the payment is on time if the CRA receives it on the next business day.
Due Dates by Remitter Type
Your remitter type is set by the average monthly withholding amount from two calendar years ago, and the CRA moves you between types automatically. The first remittance under a new schedule is one of the most common ways this penalty arises.
| Remitter Type | Average Monthly Withholding | Due Date |
|---|---|---|
| Quarterly | Under $3,000 with a perfect compliance record | 15th of the month following the quarter end |
| Regular monthly | Under $25,000 | 15th of the following month |
| Accelerated threshold 1 | $25,000 to $99,999.99 | 1st to 15th due by the 25th, 16th to month end due by the 10th |
| Accelerated threshold 2 | $100,000 or more | Within three working days after the 7th, 14th, 21st and last day of the month |
| New employer | Any | Monthly by default until the CRA reassigns you |
The 20% Rate Needs Two Things
The higher rate is frequently assumed to follow automatically from a second late payment. It does not. Subsection 227(9) requires both that this is a second or subsequent failure in the same calendar year, and that the failure was made knowingly or in circumstances amounting to gross negligence.
Gross negligence means a marked and substantial departure from the conduct of a reasonable person, and the burden of establishing it sits with the CRA. A business that fell behind through genuine cash flow difficulty, and paid as soon as it could, is not automatically in that territory. Where the 20% rate has been assessed on a second late payment without more, it is worth challenging.
Why This Matters More Than a Late Return
Money withheld from an employee’s pay is held in trust for the Crown from the moment it is deducted. It never belonged to the corporation. That single fact drives everything else about how these amounts are treated.
| Consequence | Detail |
|---|---|
| Deemed trust | The amount is held for the Crown and is not available as working capital |
| Priority over creditors | The deemed trust can rank ahead of secured lenders in many circumstances |
| Director liability | Directors are personally liable under section 227.1 for the amount, interest and penalties |
| Faster collections | The CRA moves earlier on source deductions than on almost any other balance |
| Survives bankruptcy | Director liability is not extinguished by the corporation becoming insolvent |
Pay this before you pay suppliers. An unpaid supplier can sue the corporation. Unremitted source deductions reach the directors personally, and the only defence is due diligence, meaning the care a reasonably prudent person would have exercised in comparable circumstances. Resigning does not remove liability for amounts that arose while in office, and the CRA has two years from resignation to assess.
The Other Payroll Penalty
Subsection 227(8) is a separate provision covering amounts that should have been deducted and were not deducted at all. The penalty is 10% of the amount, rising to 20% for a second failure in the same year made knowingly or through gross negligence.
This one catches employers who treated a worker as a contractor when the CRA considers them an employee. In that situation the corporation owes the deductions that should have been made, the employer portions, the failure to deduct penalty and interest, and there is no employee to recover it from.
Taxpayer Relief
The CRA can cancel or waive penalties and interest at its discretion where circumstances were beyond your control. The request goes on Form RC4288 and reaches back ten calendar years.
- Circumstances that support relief: serious illness, a death in the immediate family, a natural disaster, a postal disruption, or a CRA processing error or delay
- Circumstances that rarely do: ordinary cash flow difficulty, an accountant or bookkeeper error, or simply forgetting
- What weakens a request: a pattern of repeated late remittances, which is why the first occurrence is the right time to apply
- What it does not do: pause anything. Interest continues while the request is considered, so pay first and apply afterwards.
Fix the process, not just the payment. Almost every file we see with repeated late remittances has the same root cause: nobody owns the date. A payroll service with automatic remittance, a standing calendar entry two days before each due date, and a separate bank account holding the withheld amounts solve it permanently. Our payroll service handles the remittances, the PD7A reconciliation and the year end.
Frequently Asked Questions
Common questions from employers who missed a remittance.
Related Calculators and Guides
More tools for Ontario employers.
Pay It Today, Then Fix the Process
Send us the PD7A and the periods involved. We confirm the correct due dates for your remitter type, calculate what is actually owing, prepare a relief request where the facts support one, and take over the remittances so it does not happen again.