Consequences of non-compliance
If you do not fulfill your obligations or comply with our payroll requirements, you may be incur consequences.
Your obligations and payroll requirements:
- Obtain your employee's social insurance number (SIN)
- File the Record of Employment (ROE)
- Fulfill civil obligation
- Pay amounts deemed to be held in trust
- Maintain or provide adequate records
- Honour a payment
- Fulfill Director's liability
Obtain your employee's social insurance number (SIN)
As an employer, you have to ask your employees for their social insurance number (SIN) within three days of when they start to work for you, and record their number. If an employee does not give you his or her SIN, you must be able to show that you made a reasonable effort to get it.
If you do not make a reasonable effort to get your employee's SIN, you may have to pay a penalty of $100 for each number you don't try to get.
Employees who are in pensionable or insurable employment also have to give you their SIN within three days of starting to work for you and they can be penalized $100 for each time they don’t provide it.
Under the Department of Employment and Social Development Act, an employee who does not have a SIN when they start working for you has to apply for one and give it to you within three days after they receive it. As an employer, you must inform Service Canada within six days of your employee starting to work for you that this individual did not give you his or her SIN. If your employees need a SIN, refer them to their Service Canada Office.
File the Record of Employment (ROE)
When an employee has an interruption in earnings, you have to issue a Record of Employment (ROE) for employment insurance purposes.
If you fail to issue the ROE as required, you could be fined up to $2,000, imprisoned for up to six months, or both.
Fulfill civil obligations
Tax legislation contains various measures to encourage compliance, including penalties for a third-party who counsel others to file their returns based on false or misleading information, or who knowingly accept false information provided by their clients for tax purposes.
Different penalties can apply depending of the situation. For more information, see Information Circular IC01-1, Third-Party Civil Penalties.
Pay amounts deemed to be held in trust
As an employer, you are deemed to hold in trust, amounts that are deducted from employees and other individuals for:
- income tax
- Canada Pension Plan (CPP) contributions
- employment insurance (EI) premiums
In addition, you must also include your portion of CPP and EI when you remit deductions. If you do not remit these deductions, we will assess you the amount owing and ask you to pay the full balance immediately, including any penalties and interest that apply.
If you do not pay the balance owing, we may, at the time we issue a notice of assessment, begin legal action to:
- garnish wages or other income sources
- seize and sell assets
- use any other means under any applicable statutes or laws to collect an amount owing
Garnishment action allows us to intercept funds payable to you by a third party, such as wages or other income sources, or from any other federal government department owing you money.
We can also register a certificate in the Federal Court of Canada for unpaid amounts. Once registered, the certificate has the same force and effect as a judgment obtained in the Court. When the debt is certified, we will usually notify you by mail. If you still do not pay the amount, we may get a writ or memorial and seize assets and/or property, and have it advertised and sold by the sheriff.
For more information, see "Trust funds" and "Legal action to collect" in Information Circular IC98-1R, Tax collections policies, or go to Information on deemed trusts.
Maintain or provide adequate records
If a person does not keep adequate books and records, subsection 230(3) of the Income Tax Act allows the Minister to specify what books and records have to be kept. If the Canada Revenue Agency (CRA) finds that the books and records are inadequate, the CRA will ordinarily request a written agreement that books and records be maintained as required. The CRA will follow up the request by letter or visit within a reasonable period of time (usually not less than a month) to make sure the person complies.
If the person does not abide by the request within the time allowed, the CRA will send a formal requirement letter. The letter describes the information to be recorded in the books and describes the legal consequences and penalties for not complying.
If a person does not provide any information or documents, including books and records, section 231.2 of the Income Tax Act specifies that the Minister can require the person to give the information or documents requested.
If a person does not maintain adequate books and records or give the information or documents under section 231.2, such action may result in the CRA prosecuting that person. On a summary conviction, and in addition to any penalty otherwise payable, a taxpayer may be imprisoned and/or fined for not less than $1,000.
Alternatively, under section 231.7 of the Income Tax Act the Minister may apply to the court for a Compliance Order in which a judge would order the person to provide any access, assistance, information or document that the Minister wants under section 231.1 or 231.2. If a person does not conform or refuses to comply with an order, a judge may find the person in contempt of court, and the person could face the processes and the punishments of the court to which the judge is appointed.
If you are audited and cannot support the information we request, we may assess you based on the information we have, which could be to your disadvantage.
For more information:
Honour a payment
If you make a payment that your financial institution does not honour (including a payment on which you put a "stop-payment"), the CRA will charge you a fee.
Fulfill director’s liability
If a corporation (including for-profit or non-profit) does not deduct, remit, or pay amounts held in trust for the Receiver General (Canada Pension Plan, employment insurance, and income tax), the directors of the corporation at the time of the failure are jointly and severally, or solidarily, liable along with the corporation, to pay the amount due. This amount includes penalties and interest.
However, if the directors take action to ensure the corporation makes the necessary deductions or remittances, we will not hold the directors personally responsible.
For more information:
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