cra-assistent

← Curriculum /Payroll and source deductions /Level 1

The payroll program account

Draft — unverified

Work through these first

A payroll program account is where an employer's withholding obligations live. It attaches to the employer's business number with a two-letter identifier and its own reference number, so a business already registered for something else adds payroll rather than starting again. The account is opened before the first payday, not after — an employer who has already paid someone without one has a registration problem and a remittance problem at the same time, and the second is the serious one. This tutorial covers when an account is needed, how it fits the business number structure, what an employer must have in place before the first pay run, and the situations where an employer thinks they need one and does not.

How to work through this tutorial

This covers the account from the decision to open one to the first pay run: 1. Learn when a payroll account is required. 2. Learn how the account attaches to the business number. 3. Learn what an employer needs in place before the first payday. 4. Understand the cases where an employer does not need one. 5. Understand why registering late and remitting late are different problems. 6. Work through an example of an employer who started paying first. 7. Check your work against the common errors. 8. Verify every specific against CRA's published guidance before relying on it.

When an account is required

An employer needs a payroll program account when they pay salary, wages, commissions or other remuneration, provide taxable benefits, or otherwise pay amounts from which they must withhold. The trigger is the obligation to withhold, and that obligation comes from the working relationship — which is why the previous tutorial comes first. A payer who has correctly concluded they have an employee has, by that same conclusion, concluded they need an account. It applies to employers of every size. Someone with one part-time employee has the same obligation as someone with two hundred, and "it's only a few hours a week" changes nothing. It also applies beyond ordinary businesses: a household employing a nanny or a caregiver is an employer, and this surprises people every time. The account is opened **before** the first remittance is due, which in practice means before or around the first payday rather than at year end when the T4s are due.

How it attaches to the business number

The structure taught in the E-services line applies directly. The business number identifies the business; a program account identifies each programme it is registered for; the payroll account is one of those, with its own two-letter identifier and a four-digit reference number. Three consequences follow. A business that already has a business number — for GST/HST, or for corporate income tax — does not get a second one. It adds a payroll account to the number it has. A business with no business number at all gets one when it registers for its first program account, so an employer registering for payroll is often obtaining both at once. An employer can have more than one payroll account, distinguished by the reference number, where they want separate accounts for separate payrolls. Remittances and filings then belong to a specific account, and a remittance directed to the wrong one produces exactly the misapplied-payment problem described in the E-services line.

Before the first payday

Three things need to be in place, and only the first is about CRA. **The account**, opened and its number known, so remittances can be directed correctly. **The employee's social insurance number**, obtained from the employee. The employer is required to ask for it, and there are rules about how quickly and about what to do if the employee does not provide one. A SIN beginning with a particular digit indicates a person authorised to work only for a specified employer, which is something an employer is expected to notice. **A completed TD1** from the employee, federal and provincial or territorial, which determines the claim amounts used in calculating income tax to withhold. Without one, the employer uses the basic amounts. An employer who has none of these and a payday tomorrow should be told the order of operations plainly: the remittance obligation will arise whether or not the paperwork is done, so do the withholding correctly and sort the registration urgently in parallel.

When an account is not needed

Some payers reach for an account they do not need, and it is worth being able to say so. A business paying genuine self-employed contractors withholds nothing and needs no payroll account for those payments — though certain payments to contractors have their own reporting requirements in some industries, which is a separate obligation and not this one. A sole proprietor or a partner does not pay themselves a salary in the payroll sense; their income is business income and there is nothing to withhold on it. This confuses people constantly, particularly those who have previously run a corporation, where the position is different — a corporation genuinely can employ its own shareholder, and then payroll applies in the ordinary way. A business that has registered and then has no employees at all for a period does not thereby need to keep the account open indefinitely, which is the subject of the closing tutorial at level 3.

Late registration versus late remittance

These arrive together and are not the same problem. **Registering late** is an administrative failure. It is fixed by registering, and CRA will generally want the account backdated to cover the period in which the employer was paying. **Remitting late** is a failure to hand over money that was owing, and it carries penalties and interest of its own. Crucially, it does not require that the employer actually withheld anything — an employer who failed to withhold still owed the amounts, and the clock ran anyway. So an employer who has been paying staff for eight months without an account has one problem that is fixed by filling in a form and another that is measured in months of accumulated liability. An agent who treats the call as a registration call and stops there has answered the smaller half. The useful framing is: let's get you registered, and separately let's talk about what is owing for the period you have already paid.

A worked example: eight months in

Teaching example. The figures below are invented to show the method. They are not CRA figures, and no amount here should be used for a real taxpayer.

The figures and details in this example are invented for teaching. Nothing here should be quoted as CRA's position. Suppose Delphine opened a bakery in March and hired two part-time staff immediately. She has been paying them cash wages of, say, $1,800 a month between them, and has withheld nothing, because she assumed payroll obligations began once the business was profitable. She calls in November because her accountant mentioned T4s. She has been an employer since March. The obligation began with the first payment, not with profitability, and not with the T4 deadline she has just heard about. Her registration problem is small: she opens a payroll account and it covers the period from March. Her remittance problem is not small. Income tax, CPP and EI should have been withheld from each payment and remitted on a schedule, along with her employer share. None of it was. Suppose that comes to several thousand dollars, plus penalty and interest. There is a further sting she has not thought of. The employee portions should have come out of her staff's pay. They did not, and she cannot simply take eight months of deductions out of their next cheque — the rules about recovering amounts an employer failed to withhold are specific and limited. In practice a good deal of that becomes her cost. What helps Delphine on the call: register now, understand that the liability runs from March, and get advice quickly rather than waiting for the T4 deadline. What does not help is being congratulated on getting in touch before year end.

Common errors

Treating a call about late registration as only a registration call. The remittance liability is the larger half. Telling an employer the obligation begins at year end because that is when T4s are due. It begins with the first payment. Assuming a business needs a new business number for payroll. It adds a program account to the one it has. Forgetting that a household employing a nanny or caregiver is an employer. Assuming an employer has only one payroll account. There can be several, and a remittance must go to the right one. Telling a sole proprietor to put themselves on payroll. Their income is business income. Assuming an employer can simply recover eight months of missed deductions from the employee's next pay. The rules on recovery are specific and limited. Quoting the two-letter payroll program identifier, or SIN rules, from memory. Overlooking that some payments to contractors carry their own reporting requirements even though no withholding applies.

What to verify this tutorial against

This was drafted without a source document. The registration mechanics and the SIN and TD1 requirements are all published, and all of the specifics here need confirming. CRA's employers' guide to payroll deductions and remittances is the primary reference for when an account is required, what must be in place before the first pay, and the employer's obligations generally. Confirm the guide's current number. CRA's business number and program account guidance covers the account structure, the two-letter identifiers and the reference number. CRA's guidance on opening a payroll account sets out how and when to register, and how a backdated account is handled. CRA's guidance on the social insurance number sets out the employer's obligation to obtain one, the timing, what to do when an employee does not provide one, and the significance of a SIN indicating restricted work authorisation. CRA's TD1 pages carry the current forms, federal and provincial, and the rules where an employee does not complete one. CRA's guidance on recovering amounts an employer failed to deduct is the reference for the sting in the worked example, and is exactly the kind of rule not to paraphrase from memory. CRA's guidance on reporting payments to contractors in the construction industry is the reference for the last point in the pitfalls.

Your progress

This is your own record of what you have worked through. It says nothing about whether the content has been verified.

Quiz not attempted. 6 questions available — marking this complete does not require taking it, but the quiz is the only thing here that distinguishes having read the page from having learned it. Take the quiz

Claims to confirm

These are the checkable specifics from this tutorial — the details most likely to be wrong in a drafted page. Confirm each against CRA guidance. 0 of 12 confirmed.

Verify this tutorial

12 claim(s) still unconfirmed. Confirm them above first — verifying the page while its specifics are outstanding would defeat the purpose of listing them.