Most small businesses start with a few contract employees, but as they grow they move towards hiring full-time employees and getting them on the payroll. Sifting through all the information on the Canadian Revenue Agency to set up payroll for the first time can seem scary and daunting. This four-part blog series will take you through each step needed to set up payroll, calculate deductions, and maintain your accounts using QuickBooks in a clear and easy-to-follow manner.
Part 1: Setting up your Business Number and Payroll Program with the Canada Revenue Agency (CRA)
Before you can open a Payroll Account with the Canada Revenue Agency (CRA) you will need a business number.
What is a Business Number (BN)
A business number (BN) allows the CRA to identify a company for tax matters related to its business in Canada. The BN is based on the idea that each organization has one unique nine-digit number.
There are four major program accounts used by the CRA, each consists of a 15-character account number made up of the following components:
– a nine-digit BN
– two letters for the type of account
– four digits for the specific account reference
|Progam Account Name||Nine-digit Business Number||Two-letter Acryomn||Four-digit Account Reference||Example 15-character Account Number|
|Goods and services tax/ Harmonized sales tax||12345 6789||RT||0001||12345 6789 RT 0001|
|Payroll Account 1||12345 6789||RP||0001||12345 6789 RP 0001|
|Payroll Account 2||12345 6789||RP||0002||12345 6789 RP 0002|
|Import-Export||12345 6789||RM||0001||12345 6789 RM 0001|
|Corporate Income Tax||12345 6789||RC||N/A||12345 6789 RC|
All sole proprietors, partnerships, corporations, trusts, and other ownership types, are assigned an individual BN. For more detailed information about BNs, a good resource is the Business Number and Canada Revenue Agency Program Accounts Information Booklet
Registering for the Payroll Program
Before hiring and paying your first employee, it is important to determine your first remittance due date. Knowing your remittance due date to submit deductions to the CRA will ensure you register on time as well as avoid penalties for late remittance.
Your first remittance due date is the 15th day of the month, following the month you began withholding deductions from your employee’s pay.
You hire an employee on March 11 and you have decided to pay him bi-weekly. The first payment is made on March 25, therefore your first remittance due date would be April 15.
You hire an employee on March 25 and pay him on April 3. Your first remittance due date would be May 15.
Even if you didn’t open an account with the Payroll Program before hiring your employees, you still need to calculate deductions and remit them by the proper due date. If you fail to deduct or you remit late, you may be assessed a penalty.
Gathering the Information to Register
Preparing all the necessary information in advance will help make the process go smoothly. Start by gathering the following information needed to register for your Payroll Account:
- Social Insurance Number (SIN)
- Income tax return filed with the CRA
- Basic personal information
- Basic business information including your BN
- If incorporated, you will need your corporate name, certificate number, date of incorporation, and jurisdiction
Once you have a Payroll Program Account you will need:
- Date employees received their first wages
- Months covered for payroll of employees wages
- Type of pay period (example: weekly, quarterly)
- Number of employees
- Payroll service name (if any)
- Country of parent or affiliate (if you have a foreign-owned corporation)
- Name of franchisor and country of franchise’s head office (if any)
How to get a BN and/or Register for a Payroll Account
You can register for a BN and your CRA program accounts in any of the following ways:
If registering by telephone, mail or fax you will need to complete the Request Form.
The next blog post will explain how to calculate Personal Tax Credits, CPP and EI for your employees.
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