Transcript - Payment on Filing (PoF) – CRA’s new policy to assist employers in meeting their remittance obligations
Hello and welcome to our webinar on the new Payment on Filing policy, a new Canada Revenue Agency (CRA) policy which will assist employers in their year-end remittance obligations. The policy will allow eligible employers to submit a reconciliation payment to the CRA on or before the last day of February without being subject to a penalty or interest.
My name is Elie and I am your presenter.
Today’s webinar will be recorded and posted on Canada.ca/cra-videos at a later date.
This webinar will be of interest to you if you are:
- An employer;
- A trustee;
- A payer of other amounts related to employment.
As an employer, a trustee, or a payer of other amounts related to employment, you are responsible for deducting Canada Pension Plan (CPP) contributions, Employment Insurance (EI) premiums, and income tax from remuneration or other amounts you pay to your employees. You must remit these deductions along with your employees’ share of CPP contributions and EI premiums, to the CRA according to your remitting requirements.
If you have a question on a tax subject unrelated to payment on filing source deductions, please call the CRA business enquiries line at 1-800-959-5525.
In this webinar, we will look at:
- Introduction to Payment on Filing
- How does PoF work?
- Eligibility criteria
- How do you submit a PoF reconciliation payment?
- Example scenarios
- Recap of eligibility criteria
- More information
Slide 4: Introduction to Payment on Filing
Some employers have experienced difficulties calculating the correct amount of their final remittance, due to not being able to gather essential third party information until after the end of December. To avoid penalties, they have been intentionally over remitting their final remittance.
Slide 5: Introduction to Payment on Filing
We are responding to these concerns with a new Payment on Filing policy, or, in short the “PoF” policy. This new policy will be available to use this January 2020 for the 2019 tax filing season.
Slide 6: How does PoF work?
Following the final remittance at year-end, the PoF policy will allow eligible employers to submit a reconciliation payment to the CRA on or before the last day of February without being subject to a penalty or interest. This will provide you with the confidence to calculate an estimate for your final remittance, to the best of your ability, knowing you have the leeway to reconcile after, if certain eligibility criteria are met.
Slide 7: Eligibility Criteria
The new policy is open to all employer remitter types that meet the eligibility criteria.
First, your PoF remittance must be less than 1% of your total annual remittances; and received on or before the last day of February.
Second, you must have a perfect compliance history for the related tax year. This means no late or outstanding remittances, no assessments, and your T4 summary must be filed on time; and
Finally, you must be affected by at least one of the following extenuating circumstances:
- You have employees that exercise stock-based remunerations;
- You have employees that reside in other tax jurisdictions;
- You rely on third party information for:
- Health benefits;
- Broker information;
- Taxable benefits;
- Automobile fleet mileage.
Slide 8: How do you submit a PoF reconciliation payment?
There are four ways to make your PoF reconciliation payment:
- My Business Account , also known as MyBA, provides you with a secure and convenient way to make a pre-authorized debit;
- You can remit through My Payment, which is a fast and secure method to make sure CRA receives your remittance on time;
- If you chose to mail your payment, you can attach a cheque with your T4 summary. Please make sure you allow for 7-10 business days for mailing. The CRA will honor the date the mail is received by CRA and not the postmarked date by Canada Post;
- You can pay at a financial institution. Please contact our Business Enquiries line at 1-800-959-5525 to request that a PD7R PoF remittance voucher be mailed to you. Please ensure that you allow for 7-10 business days for mailing.
Slide 9: Example scenario 1: Suzanne’s Designer Shoes
We are now going to show you two examples of employers who took advantage of the PoF option. These scenarios will give you insight on how the new PoF policy will ease the pressure associated with your year-end remittance obligations.
In the first scenario, we have Suzanne who is a new business owner and is trying to grow her business. Suzanne is a driven and dedicated employer who prides herself on always meeting her business obligations which includes paying her business expenses, payroll and taxes on time.
Her business philosophy is to allow her employees to buy ownership interest which in turn increases productivity. So, Suzanne offers her staff incentives through stock-options.
Slide 10: Example scenario 1 continued
At the end of December, a few employees exercised stock-options. When Suzanne went to complete her year-end remittance, she was not able to obtain the essential information to calculate the benefits for these employees. As a new business owner, Suzanne didn’t know what to do, so she reviewed the CRA Employers’ Guide – Payroll Deductions and Remittances for guidance. Under Chapter 8 – Remitting payroll obligations, she learned that CRA has a Payment on Filing policy that allows employers to remit a reconciliation payment by the end of February if certain eligibility criteria is met.
She verified that she met the eligibility criteria of having a perfect payroll compliance history and that her situation was one of the listed circumstances – employees who exercise stock options. This provided Suzanne with the comfort that she could estimate the final remittance to the best of her ability and if she under-remitted by less than 1% of her total annual remittances she would not be penalized.
Slide 11: Example scenario 1 continued
In late January, Suzanne acquired the remaining employee’s stock information and proceeded to calculate the T4 summary. When completed, she noticed that she did in fact under remit her final remittance by less than 1%. Suzanne completed the T4 summary, attached a cheque for the remaining amount and mailed it to the CRA by February 29.
Suzanne’s payroll taxes are now up-to-date and the PoF remittance was accepted penalty free.
Slide 12: Example scenario 2: Tony’s Transport
In our second scenario we have Tony, he is the owner of a carrier company that transports goods between Canada and the US.
Tony is experiencing difficulties acquiring his fleet mileage at year-end, due to a small percentage of drivers that are still on the road until after December 31st. Fleet mileage is crucial to calculating the taxable benefits, which affects his drivers’ source deductions.
Slide 13: Example scenario 2 continued
Tony understood that the CRA had a policy in place for year-end extenuating circumstances. So he reviewed the Employers’ Guide – Payroll Deductions and Remittances to familiarize himself with the rules. He learned that if his estimate was off on the final remittance and less than 1% of total remittances for the year, he could remit the difference by the end of February.
Tony’s research gave him reassurance that he could estimate his final remittance to the best of his ability and he proceeded to do so. Additionally, he verified that he met the eligibility criteria of perfect payroll compliance by reviewing his account information on MyBA.
Slide 14: Example scenario 2 continued
In late January, Tony’s remaining fleet returned and he acquired the missing fleet mileage needed to calculate his T4 summary. After calculating his T4 summary, he discovered that his final remittance was short by less than 1% of his total annual remittances. On Feb. 29, Tony filed his T4 summary and submitted his reconciliation payment for the remaining balance through My Payment.
Tony's payroll taxes are now up-to-date, and the reconciliation payment was accepted penalty free.
Slide 15: Recap: eligibility criteria
We are now going to recap the PoF policy requirements:
- The reconciliation payment must be:
- Less than 1% of the total annual remittances; and
- Received on or before the last day of February.
- You must:
- Have a perfect payroll compliance history for 12 months within the applicable tax year. This means no late or outstanding remittances, no assessments;
- File all T4 slips on or before the due date;
- Be impacted by one or more of the following circumstances:
- Have employees who chose to be paid stock-based salaries
- Have employees who reside in other tax jurisdictions
- Rely on third party information for insurance, health benefits, broker information, taxable benefits, or automobile fleet mileage.
Slide 16: More information
If you are looking for more information regarding your year-end remittance obligations or would like to review the PoF policy eligibility criteria, we recommend the following CRA publications:
T4001 - Employers’ Guide – Payroll Deductions and Remittances
- Chapter 8 – Remitting payroll deductions,
- Under the “Payment on Filing” section
The T4001 can be found at Canada.ca/cra-forms-publications
Note: The update to the Employers’ Guide will be available in late 2019/early 2020 or you can visit Canada.ca/Payment-on-Filing
You can also call the Business Enquiries line at 1-800-959-5525.
We have now reached the end of our webinar. Thank you for joining me. I hope you found today’s information helpful.
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