This one is for Canadian employers. The deadlines, the tests and the slips are all the CRA's. If you run payroll in the United States, your platform files with different authorities on different dates, and the part of this that applies to you is the last section: the payroll accounts in your books have to agree with what was paid, whoever filed it.
Payroll is one of the few areas where being slightly late has an immediate, mechanical cost. The arithmetic is handled by software and is rarely the problem. The problems come from timing, from classification, and from a year end reconciliation nobody plans for.
One: the remittance date
Income tax, CPP and EI withheld from pay, plus the employer portion, are held in trust and remitted on a schedule set by your remitter type. Most small employers remit by the fifteenth of the month following the pay.
The penalty applies from the first day late and rises with how late it is, and it is charged against the amount rather than against the delay. A large remittance a few days late costs considerably more than a small one a month late.
The most common cause is not forgetting. It is a cash decision: paying staff on time and holding the remittance for a week to get through a tight period. It is completely understandable, and it is one of the more expensive ways to borrow money.
Two: employee or contractor
Whether somebody is an employee is decided by the working relationship, not by what the agreement calls it and not by whether they send you an invoice. Control over how the work gets done, who supplies the tools, whether the person can profit or lose on the job, and how far they are integrated into the business all count.
Getting it wrong is not a small correction. A reassessment can reach back over the period and cover the deductions that should have been withheld, both the employee and the employer halves, with interest on top.
Three: the year end reconciliation
T4s have to agree with what was actually paid and actually remitted. Where they do not, the difference is usually one of three things: a taxable benefit that was never added to income, a bonus paid outside the payroll system, or a remittance posted to the wrong period.
Reconciling the payroll accounts every month turns this into a five-minute check in February. Left to the year end, it becomes a hunt through twelve months of entries for a difference that is often small and always has to be found.
The rhythm that avoids all three
Run payroll on a fixed schedule, remit on the date rather than on the cash, and tie the payroll accounts back to the remittances monthly. That is the whole of it. Payroll rewards routine more than almost anything else in a set of books.