Penalties and interest

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Payroll penalties and interest

Payroll penalties are assessed for errors in calculation, deductions, paying (remitting) or filling. If you do not pay an amount that is due, the CRA may apply interest from the day your payment was due.

Penalties are assessed for:

If you do not pay an amount that is due, the CRA may apply interest from the day your payment was due. The CRA sets the interest rate every three months, based on prescribed interest rates. Interest is compounded daily. The CRA also applies interest to unpaid penalties.

Inaccurate calculation or deduction

If you fail to deduct the required CPP contributions or EI premiums from the amounts you pay your employee, you are responsible for these amounts even if you cannot recover the amounts from the employee. We will assess you for both the employer’s share and the employee’s share of any contributions and premiums owing. We will also assess a penalty and interest.

If you failed to deduct the required amount of income tax from the amounts you pay your employee, you may be assessed a penalty. As soon as you realize you did not deduct the proper amount of income tax, you should let your employee know. Your employee can either pay the amount when they file their income tax and benefit return or they can ask you to deduct more income tax at source.

For more information:

Penalty for failure to deduct

We can assess a penalty of 10% of the amount of Canada Pension Plan (CPP), employment insurance (EI), and income tax you did not deduct.

If you are assessed this penalty more than once in a calendar year, we will apply a 20% penalty to the second or later failures if they were made knowingly or under circumstances of gross negligence.

To find out how to deduct CPP, EI and income tax:

Late or non-payment (remittance)

We will assess this penalty when:

  • you deduct amounts over $500, but do not send them to us
  • you deduct amounts over $500, but send them to us late
  • you deduct amounts under $500, and knowingly or under circumstances of gross negligence do not send them to us or send them late

When the due date falls on a Saturday, a Sunday, or a public holiday recognized by the CRA, we consider your payment to be on time if we receive it on the next business day.

The penalty is:

  • 3% if the amount is one to three days late
  • 5% if it is four or five days late
  • 7% if it is six or seven days late
  • 10% if it is more than seven days late, or if no amount is remitted
  • 20% if this is the second or subsequent time you are assessed this penalty in a calendar year, if the failures were made knowingly or under circumstances of gross negligence
Example

When a remittance is considered late

A remittance that was due in January of the current year (for deductions made in December of the previous year) is considered late when paid with the previous year’s information return (T4, T4A) and this return is filed after the remittance due date.


Note


We will charge you a fee for any payment that your financial institution refuses to process. If your payment is late, we can also charge you a penalty and interest on any amount you owe.

To find out what your due date is:

Late filing information return

There is a legislated penalty for failure to file an information return by the due date.

You have to give the recipient his or her slip and file your information return with the CRA on or before the due date. If the due date falls on a Saturday, a Sunday, or a public holiday recognized by the CRA, your information return is due the next business day.

We consider your return to be filed on time if we receive it or if it is postmarked on or before the due date.

We may assess a penalty if you file your information return late.

Each slip is an information return, and the penalty we assess is based on the number of information returns you filed late. The penalty is $100 or the amount calculated according to the chart below, whichever is more:

Legislated late-filing penalties
Number of information returns (slips) filed late Penalty per day (up to 100 days) Maximum penalty
1 to 50 $10 $1,000
51 to 500 $15 $1,500
501 to 2,500 $25 $2,500
2,501 to 10,000 $50 $5,000
10,001 or more $75 $7,500

These types of information returns follow the above penalty structure:

Relieving administrative policy

You have to give your employee or recipient his or her slip and file your information return with the Canada Revenue Agency on or before the due date. If the due date falls on a Saturday, a Sunday, or a public holiday recognized by the CRA, your information return is due the next business day.

We consider your return to be filed on time if we receive it or if it is postmarked on or before the due date.

We may assess a penalty if you file your information return late. For certain information returns, we have an administrative policy that reduces the penalty that we assess so it is fair and reasonable for small businesses.

Each slip is an information return, and the penalty we assess is based on the number of information returns you filed late. The penalty is $100 or the amount calculated according to the chart below, whichever is more:

Penalties under the relieving administrative policy
Number of information returns (slips) filed late Penalty per day (up to 100 days) Maximum penalty
1 to 5 penalty not based on number of days $100 flat penalty
6 to 10 $5 $500
11 to 50 $10 $1,000
51 to 500 $15 $1,500
501 to 2,500 $25 $2,500
2,501 to 10,000 $50 $5,000
10,001 or more $75 $7,500

These types of information returns follow the penalty structure under the relieving administrative policy:

Wrong method of filing information return

There is a penalty for failure to file information returns over the Internet.

As of January 1, 2024, if you file more than 5 information returns for a calendar year and you do not file the returns by Internet file transfer or Web Forms, you may have to pay a penalty as determined in the table below.

Each slip is an information return, and the penalty we assess is based on the number of information returns filed in an incorrect format. The penalty is calculated per type of information return. For example, if you file 6 NR4 slips and 6 T4 slips on paper, we would assess two penalties of $125, one per type of information return.

Penalty based on the number of information returns (slips)
Number of information returns (slips) by type Penalty
6 to 50 $125
51 to 250 $250
251 to 500 $500
501 to 2,500 $1,500
2,501 or more $2,500

These types of information returns follow the above penalty structure:

Wrong method of payment (remittance)

Threshold 2 accelerated remitters must remit their deductions electronically or in person at their Canadian financial institution. Amounts you deduct from remuneration you pay any time during the month must be received by your Canadian financial institution no later than the third working day (not counting Saturdays, Sundays, or public holidays recognized by the CRA) after the end of the following periods:

  • from the 1st through the 7th day of the month
  • from the 8th through the 14th day of the month
  • from the 15th through the 21st day of the month
  • from the 22nd through the last day of the month

All payments that we received at least one full day before the due date will be considered as having been made at a financial institution, so no penalty will be charged.

Payments made on the due date but not at a financial institution can be charged a penalty of 3% of the amount due.

All payments made after the due date can be charged a penalty calculated at graduated rates.


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Date modified:
2023-08-16