Quarterly Remitter Category for New Employers
Notice to the reader
This measure has received Royal Assent.
Currently, a new employer is required to make monthly remittances of employees’ Canada Pension Plan (CPP) contributions, employment insurance (EI) premiums and income tax deductions, as well as the employer’s share of CPP contributions and EI premiums, for at least the first year after opening a payroll account with the Canada Revenue Agency (CRA).
Budget 2015 introduces a new quarterly remitter category for new small employers. For amounts to be withheld after 2015, an eligible employer may remit quarterly instead of monthly if their monthly withholding amount (MWA), which includes the employer’s share of CPP contributions and EI premiums, is less than $1,000 and they maintain a perfect compliance history with their payroll and goods and services/harmonized sales tax (GST/HST) tax obligations.
1. What is the current remittance requirement for new employers?
Currently, new employers are required to make monthly remittances of employees’ CPP contributions, EI premiums and income tax deductions for at least the first year after opening a payroll account with the CRA. The monthly remittance also includes the employer’s share of CPP contributions and EI premiums.
After a 12-month period, the employer may be eligible to remit on a quarterly basis if they have an average monthly withholding amount (AMWA) of less than $3,000 and a perfect remittance and filing compliance history.
2. What is the new remitter category that was announced in Budget 2015?
To reduce the compliance burden, Budget 2015 proposed to reduce the frequency of remittances for small new employers by introducing a new quarterly remitter category. Under this measure, an eligible employer may choose to immediately make quarterly remittances for the first year instead of sending monthly remittances.
3. When does this change come into effect?
The change will apply to amounts deducted or withheld after 2015.
4. Who is considered an eligible employer for the purposes of the new quarterly remitter category?
An eligible employer is an employer who pays remuneration to an employee for the first time after 2015. This can include a business started before 2016 that has not previously paid remuneration and starts to pay remuneration after 2015.
5. What are the other eligibility requirements for the new quarterly remitter category?
has a MWA of less than $1,000; and
maintains a perfect compliance history.
a. What is a MWA? The MWA is the monthly total of the employees’ CPP contributions, EI premiums and income tax deductions required to be deducted, plus the employer’s share of CPP contributions and EI premiums. The employer is required to remit the MWA to the CRA, by a specified due date.
b. What does it mean to maintain a perfect compliance history? A perfect compliance history means that, over a 12-month period, an employer has made all deductions and remittances of CPP contributions, EI premiums and income tax on time, paid the GST/HST, and filed T4 type information returns and GST/HST returns on time.
ABC Tailor, a Nova Scotia company that hires one employee earning an annual salary of $30,000 would have a MWA of less than $1,000 to remit to the CRA. If this employer has a perfect compliance history, this employer is eligible to be a quarterly remitter.
On the other hand, ABC Company in Nova Scotia that hires two employees each earning an annual salary of $30,000 would have a MWA of more than $1,000 to remit to the CRA. This employer does not qualify to be a quarterly remitter and must remit monthly for at least the first year.
Note: An employer can use the Payroll Deductions Online Calculator to help calculate the amounts to deduct from employees’ pay according to the province or territory of employment and pay periods.
6. Does a new employer have to apply to be a quarterly remitter?
No, a new employer does not need to apply to remit quarterly.
When an employer decides to hire their first employee, they must register for a payroll program (RP) account. If an employer does not already have a business number (BN), the employer must register for a BN.
After a new employer registers for a payroll program account with the CRA, the CRA will review the payroll registration information provided and notify the employer if they can remit quarterly. The CRA will send the employer a Form PD7A, Statement of Account for Current Source Deductions and let the employer know if they are eligible to start remitting quarterly. If the PD7A does not say that an employer is eligible to remit quarterly, then the employer must send their remittance to the CRA every month.
7. When are quarterly remittances due?
The CRA must receive an eligible employer’s remittances on or before the 15th day of the month immediately following the end of each quarter.
|January to March||April 15|
|April to June||July 15|
|July to September||October 15|
|October to December||January 15|
8. What happens if an eligible employer fails to comply with their quarterly remittance requirements?
One of the conditions of eligibility is to maintain a perfect compliance history while a quarterly remitter. If an employer fails to make their quarterly remittance by its due date, the employer will not be able to continue to remit quarterly and will be required to remit monthly beginning with the month following the end of the quarter during which the remittance was not received on time.
ABC Construction has MWA of $500 for each of the months January, February and March. The employer remits their quarterly remittance of $1,500 late, which was due on or before April 15. Although the employer will be able to make their quarterly remittance for April, May and June on or before July 15, the employer must start to remit monthly beginning with their July MWA which is due by August 15.
9. What happens if an eligible employer’s MWA changes and increases to a $1,000 or more?
Under this new remitter category, an eligible employer is required to have a MWA (see Q5 above) of less than $1,000 in order to remit on a quarterly basis. If, in the 12 months following the first time that remuneration is paid, an eligible employer’s MWA for a particular month is $1,000 or more, the employer will not be able to continue to remit quarterly.
The MWA for all the months in the quarter during which the employer had a MWA of $1,000 or more must be remitted by the due date for that quarter, and the MWA for all months following that quarter must be remitted by the 15th day of each following month.
ABC Auto Repairs has MWA of $500 for January 2016, $1,500 for February 2016, and $1,500 for March 2016. The employer’s quarterly remittance of $3,500 is due by April 15, 2016. The employer will have to remit monthly beginning with the MWA for the month of April which is due by May 15.
Note: After the first year, this employer may be eligible to continue to remit quarterly under the existing quarterly remitter category if the necessary conditions are met.
10. Can a new employer who first hires an employee after December 31, 2015 remain eligible to remit quarterly after the first year?
An employer may be eligible to continue to remit on a quarterly basis for the following year(s), if the employer has:
- a perfect compliance history; and
- an average monthly withholding amount (AMWA) of less than $3,000 in either the first or the second calendar year before the current calendar year.
The employer can continue to send in their remittances on a quarterly basis after the first year, unless the CRA tells the employer to remit on a different schedule.
11. What is an average monthly withholding amount (AMWA)?
The AMWA is the total of the employees’ CPP contributions, EI premiums and income tax deductions required to be deducted, plus the employer’s share of CPP contributions and EI premiums divided by the number of months for which amounts were required to be remitted. The AMWA determines the remitting frequency for employers. The remitting frequency can be monthly, twice monthly, four times monthly or quarterly. To establish an AMWA, the employer must have remitted for 12 months or more.
For further information concerning the existing remitter categories, see Chapter 8 of the Guide T4001, Employers’ Guide - Payroll Deductions and Remittances or go to www.cra.gc.ca/payroll.
12. Where can I get more information about these changes?
The CRA is committed to providing taxpayers with up-to-date information. The CRA encourages taxpayers to check its web pages often. All new forms, policies, and guidelines will be posted as they become available.
In the meantime, please consult the Department of Finance Canada's Budget 2015 documents for details.
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