Failure to deduct income tax source deductions generally does not generate a liability for that tax

Where an employer has failed to withhold income tax source deductions from payroll of a resident employee, it is liable only for penalties and related interest and not for the income tax itself.

This CRA position appears clearly correct given that s. 227(8.4) specifically deems the employer to be liable for the undeducted income tax only where the employee was a non-resident.

Neal Armstrong. Summary of 6 November 2014 T.I. 2014-0530991E5 under s. 153(1).