You have hired an employee but what do you need to know?

September 30, 2016
by Jared Cross, C.P.A, C.G.A
Employer Responsibilities
As an employer, you are required to deduct and remit CPP, EI, and income tax for each employee and prepare a T4 Statement of Remuneration Paid for the year. However, some employers are not aware that when they hire an employee, they are required to request the employee’s social insurance number (SIN) within 3 days and complete a TD1, Personal Tax Credits Return to keep with the company’s payroll records. If you do not receive these 2 items, you are still responsible for calculating and deducting CPP, EI, and income tax for each employee, however, continue to make a reasonable effort to avoid possible penalties from CRA.
 
Taxable Benefits
Need help calculating employee payroll taxes? If you provide your employees with a benefit or allowance, the amount may be considered a taxable benefit and required to be included as income to the employee when preparing T4 Statement of Remuneration Paid. A taxable benefit is not always paid in cash to the employee, therefore, can be overlooked by employers. Some common taxable benefits include the following:
-extended medical coverage
-use of company vehicles
-gifts and awards
-housing and/or utilities
-low or interest free loans
 
If you do provide your employee with a taxable benefit, this amount should be included in their income when calculating CPP, EI, and income tax deductions.
 
Calculating Deductions
Most bookkeeping software provides a payroll function that calculates vacation pay, CPP, EI, and income tax deduction amounts. Alternatively, CRA provides a payroll deductions online calculator free on their website; simply enter the employee’s payroll information and save a copy of the calculation with your payroll records. The online calculator also provides an employer remittance summary, calculating the employer portion of CPP and EI that is required.
 
Paying Source Remittances
Payments can be made using online banking, Interac Online, Visa Debit, pre-authorized debit, by credit card through a service provider, or at your bank. Regardless of the method of payment, to avoid interest and penalties on late remittances, CRA must receive payment on or before your remittance due date.
 
If your organization is in need of professional bookkeeping services, help calculating employee payroll taxes, or you have any questions regarding your payroll responsibilities, please feel free to contact our office.