If you are a business owner in Canada who has employees, you are required to open a payroll account with the Canada Revenue Agency (CRA) so you can make mandatory deductions and access important tax information. A payroll account can be easily set up with some basic business information and must be done before you can pay your employees.
CRA Payroll Account
A CRA payroll account allows businesses to access important information including GST and HST tax returns, payroll deductions, excise taxes, corporate income taxes, and more. This information can be easily accessed on the Canada Revenue Agency’s website, allowing you to access your business information securely.
Each payroll program account is given a 15-character identification number by the CRA. The account number contains a 9-digit business number, which is what identifies your business in the federal government numbering system. It also includes a two-letter code that identifies the type of program and a four-digit reference number to indicate each account in a program that a business may have. The two-letter code for a payroll program is “RP”.
When Should you Open the Account?
You must open a payroll account with the CRA as soon as you know that you are an employer, trustee, or payer that will be paying employees. The CRA considers someone to be an employer if they pay wages, salaries, bonuses, vacation, or tips to employees. This also includes providing taxable benefits like auto allowances and any other evidence that indicates an employer-employee relationship exists.
Even if you may not consider yourself an employer, there are circumstances under which the CRA could consider you a business and would give you access to the deduction and information systems online. For example, if you have a regular babysitter, you could register with the CRA and pay him or her through payroll. This would allow you to generate a T4 for the babysitter who can then use that to report their income.
In fact, you cannot pay your employees until the payroll account has been set up. Your registration must be submitted before the first remittance due date, which is the 15th day of the month following the month that you started withholding deductions from employee paychecks. This date is fixed unless the CRA instructs you to make remittances on a different frequency.
For example, if you pay your first employee on June 25th, your first remittance of withholdings would be due on July 15th. The remittance date is based on the first paycheck date, not the date the employee was hired.
If you fail to open a CRA payroll account before hiring employees, you must still calculate deductions and pay them by the due date. If this is not done, you may be assessed a penalty.
Opening your CRA Account
The first step to opening your CRA payroll account is to register for a Business Number if you don’t already have one. This can be done through the CRA’s Business Registration Online system, which is the same place you can register for your payroll account number.
To be eligible to use the Business Registration Online system, you must be the business owner, a third-party requestor, a representative that has a RepID or GroupID, or an individual that employs a domestic worker, caregiver, or babysitter. In addition, you must have a valid social insurance number and have an income tax return filed with the CRA.
To register, you must first provide some personal information, including your full name, social insurance number, date of birth, and postal code. Additional information on the business is required as well, including the name of the business, type of legal entity, a physical address, and a description of the major business activities.
Once you have provided this basic information, the CRA requests additional data about the specifics of the business’ payroll process. This includes the first date your employees received wages, the months covered for payroll of employee wages, the type of payroll cycle (bi-weekly, weekly, etc.), and the number of employees. You must also provide the name of the payroll service used if applicable.
If you do not want to set up your payroll account online, you can also mail or fax From RC1 to your nearest tax service office or tax center. This form can be downloaded directly from the CRA’s website. You can also register by phone by calling the CRA’s business enquiries line at 1-800-959-5525.