Avoiding CRA penalties

Inaccurate calculations or deductions can create unwanted results. The CRA outlines the following guidance:  

If you fail to deduct the required CPP contributions or EI premiums from the amounts you pay your employee, you are responsible for these amounts even if you cannot recover the amounts from the employee. CRA will assess you for both the employer’s share and the employee’s share of any contributions and premiums owing. CRA will also assess a penalty and interest. 

If you failed to deduct the required amount of income tax from the amounts you pay your employee, you may be assessed a penalty. As soon as you realize you did not deduct the proper amount of income tax, you should let your employee know. Your employee can either pay the amount when they file their income tax and benefit return, or they can ask you to deduct more income tax at source. 

Penalty for failure to deduct 

The CRA can assess a penalty of 10% of the amount of Canada Pension Plan (CPP), employment insurance (EI), and income tax you did not deduct. 

If you are assessed this penalty more than once in a calendar year, CRA will apply a 20% penalty to the second or later failures if they were made knowingly or under circumstances of gross negligence. 

For more information, visit the CRA website.