Don’t Be Late! CRA’s Electronic Remittances

Employers in Canada are required to remit source deductions—such as income tax, Canada Pension Plan (CPP), and Employment Insurance (EI) contributions—by specific due dates based on their remitter type. These due dates vary depending on the employer’s average monthly withholding amount (AMWA) from two years prior. But when is an electronic payment considered to be received? It’s an important question because it can be very expensive to have the remittance you thought you paid on time, lost in cyberspace. Here’s what you need to know:

The Backdrop: CRA classifies remitters as quarterly, regular, or accelerated, each with distinct remittance deadlines. For example:

• Quarterly remitters must pay by the 15th of the month following the quarter.
• Regular remitters must pay by the 15th of the month following the payroll.
• Accelerated remitters may have to remit within 3 business days of specific pay periods.  

When Is a Payment Considered “Received”? The CRA accepts payments “on time” only if the funds reach their account by the due date. If the due date falls on a weekend or public holiday, the payment is considered on time if it is received on the next business day.

Here’s what that means in a digital world: even if an employer initiates an electronic payment on the due date, delays in processing by the financial institution can result in the CRA receiving the funds late.

Tax Payment Trap: That’s where the expensive penalties and interest come in. CRA does not consider the payment date or transaction initiation date—only the date the funds are credited to their account.

Likewise, if the payment is sent by mail, the receipt of the cheque is recorded on the date when CRA receives it. Considering the postal delays, electronic payments would be the best option going forward. But, if remitting by mail, be sure to track down the PD7A Remittance advices. This form is sent to regular and quarterly remitters. You will not receive a PD7A if you remit (pay) electronically.

Penalty Implications for Late Remittances. CRA imposes significant penalties for late remittances, regardless of intent or payment method. The standard penalty structure is as follows:

• 3% if the payment is 1 to 3 days late
• 5% if 4 to 5 days late
• 7% if 6 to 7 days late
• 10% if more than 7 days late or not remitted at all

In cases of gross negligence or repeated late payments, CRA may impose a penalty of 20%.

These penalties apply even if the employer can demonstrate that the payment was initiated on time. CRA’s stance is that the remittance must be received—not just sent—by the deadline.

If the business does not pay an amount that is due, the CRA will also apply interest from the day the payment was due.

Common Pitfalls with Electronic Payments. Electronic payments are generally faster and more reliable than cheques, but they’re not foolproof. Common issues include:

• Bank processing delays: Some banks may take 1–2 business days to process electronic payments.
• Incorrect account setup: If the CRA account number is entered incorrectly, the payment may be delayed or rejected.
• Payment cut-off times: Payments initiated late in the day may not be processed until the next business day.

To avoid penalties and interest employers should initiate payments at least a few business days before the due date, especially if using online banking or third-party payroll services.

Best Practices to Avoid Penalties. To ensure compliance and avoid costly penalties:

• Verify remitter type and due dates via CRA’s My Business Account portal.
• Schedule payments early, ideally a few days before the deadline.
• Confirm receipt of funds with CRA or your financial institution.
• Use CRA-approved payment methods, such as pre-authorized debit or online banking with direct CRA crediting. CRA’s My Payment is an online service that allows individuals and businesses to make secure payments directly from their bank accounts using Visa Debit or Debit MasterCard. It supports payments for personal income tax, GST/HST, payroll deductions, and other CRA balances, but does not accept credit cards

The Bottom Line: Best Practice? Pay a few days early. While electronic payments offer convenience, they do not guarantee timely receipt by CRA. Employers must understand that CRA’s penalty system is based on the date of receipt—not the date of payment initiation. To safeguard against penalties, proactive planning and early remittance are essential.

Even a delay of one day can result in a 3% penalty, which can add up quickly for large payrolls. Staying informed and paying early is the best defense against unnecessary financial consequences.

Best Practice: Pay a few days early