Source Deductions: An Employer's Guide to Withholding and Remitting

An employer's source deductions obligation is to withhold CPP, CPP2, Employment Insurance premiums, and income tax from every employee's pay, add the employer's own share of CPP, CPP2 and EI, and remit the combined total to the CRA on an assigned schedule. Missing or late remittances are treated as a compliance failure with a penalty plus interest, and directors can carry personal liability for amounts withheld but not remitted. This guide covers what gets withheld, how remittance frequency is set, and what a late remittance actually costs.

What gets withheld from every paycheque

CPP and CPP2 are matched dollar-for-dollar by the employer; EI is matched at 1.4 times the employee premium. Income tax withheld has no employer match — it is purely the employee's own liability, collected at source. For the full 2026 CPP/CPP2/EI figures and maximums, see CPP and EI maximum contributions 2026 and CPP2 explained.

Registering to withhold: the payroll (RP) account

Before an employer can legally withhold and remit these amounts, it needs a payroll program account (RP) registered under its Business Number with the CRA — separate from the GST/HST (RT) account and the corporate income tax (RC) account that typically sit under the same Business Number. The RP account is what generates the remittance schedule and the annual T4 filing obligation.

How remittance frequency is assigned

The CRA assigns remittance frequency based on an employer's average monthly withholding amount (AMWA) — a rolling calculation of how much CPP, CPP2, EI and income tax the employer withholds each month. In broad terms, employers sit in one of a small number of tiers:

• Regular remitters — most new and small employers, remitting monthly, due by the 15th of the following month.
• Accelerated remitters — larger payrolls with a higher AMWA, required to remit more than once a month as withholding amounts grow.

A new employer typically starts as a regular monthly remitter and is reassessed by the CRA as its payroll grows. The exact dollar thresholds that move an employer between tiers, and the exact due dates within each tier, are set and periodically adjusted by the CRA — confirm the current assignment on the employer's own CRA My Business Account rather than assuming last year's tier still applies.

What happens when a remittance is late

A late remittance is a compliance failure, not a grace-period miss. The CRA can assess:

• A penalty on the amount remitted late, which the CRA describes as scaling with how late the remittance is and whether the employer has been late before. RN Canada does not publish a specific percentage here because the exact rate is set by the CRA and should be confirmed directly against current CRA guidance rather than assumed from a prior year's figure.
• Arrears interest on the outstanding balance from the day it was due until it is paid.
• Increased scrutiny — repeat late remittances can trigger closer CRA review of an employer's payroll account, including a shift to a more frequent remittance schedule.

Beyond the CRA's own penalty and interest, source deductions are held in trust — an employer that withholds an amount from an employee's pay but does not remit it has taken money that was never legally the employer's to keep. Directors of a corporation can be held personally liable for source deductions withheld but not remitted, independent of the corporation's own liability. This is one of the few payroll failures that can pierce the corporate shield, which is why remittance discipline matters even when cash flow is tight.

If a remittance is going to be late, the better path is to contact the CRA before the due date rather than after — proactively flagging a cash-flow issue is treated differently than a missed remittance discovered on review.

Year-end: T4s and the T4 Summary

After the calendar year closes, an employer must issue a T4 slip to every employee showing total employment income, CPP, CPP2, EI and income tax withheld, and file a T4 Summary reconciling those slips against what was actually remitted through the year. Both are due by the last day of February following the tax year — so 2026 T4s and the T4 Summary are due by the end of February 2027. Mismatches between year-to-date remittances and the T4 Summary total are a common trigger for CRA follow-up, which is why a Q4 reconciliation check against the actual 2026 figures is worth doing before year-end rather than after.

What this looks like day to day

In practice, running source deductions correctly means: registering the RP account before the first payroll, calculating CPP/CPP2/EI/tax correctly for every pay run (including tracking each employee's own $74,600 and $85,000 CPP stop-points and $68,900 EI stop-point independently), remitting the combined total on the assigned schedule, and reconciling and filing T4s at year-end. For the province-specific picture — Alberta has no additional payroll levy; British Columbia layers on an Employer Health Tax above its exemption threshold — see our Alberta payroll guide and BC Employer Health Tax guide.

How RN Canada helps

RN Canada sets up CRA payroll (RP) accounts, calculates and remits CPP, CPP2, EI and income-tax withholdings on the correct schedule, and prepares T4 slips and the T4 Summary for owner-managed businesses across Alberta and British Columbia — so remittances are never late and directors are never exposed to trust-fund liability. See our bookkeeping & payroll service, the employer payroll cost calculator to model a hire's true cost, and our payroll FAQ for quick answers.