Quick answer: Once your corporation has employees, you register a payroll (RP) account under your business number, then withhold income tax, CPP and EI from every pay and remit them — along with your own employer portions — to the CRA on a set schedule. T4 slips summarize the year for each employee. Because withheld amounts are held in trust, unremitted source deductions can make directors personally liable, even though the corporation itself is a separate legal entity.
Key takeaways
- Opening a payroll (RP) account under your business number registers you as an employer with CRA.
- Employers must withhold income tax, CPP and EI from employee pay, and remit them together with employer portions.
- Employers also contribute their own share of CPP and an employer share of EI on top of what's withheld from employees.
- How often you remit depends on your remitter type, which CRA assigns and can change over time.
- T4 slips are due each year, and directors can be held personally liable for unremitted source deductions.
The moment your corporation pays its first employee — including you, if you take a salary rather than dividends only — payroll compliance stops being optional. Unlike most other tax obligations, missed payroll remittances can reach past the corporation and land on directors personally. Here's what an RP account actually involves.
Opening an RP account
Your business number (BN) is the umbrella identifier CRA uses across program accounts — corporate tax, GST/HST, and payroll among them. A payroll program account carries the suffix RP. You need to register one before your first payroll run if your corporation has employees, which includes an owner taking a salary. It's not required if your only payments are dividends, or if the people you pay are genuinely independent contractors rather than employees — a distinction that also connects to personal services business risk if the relationship looks more like employment than a contract.
What gets withheld from every pay
Three amounts come off an employee's gross pay before they see it:
- Income tax — based on the employee's TD1 federal and provincial forms, which set the personal credits used to calculate withholding.
- Canada Pension Plan (CPP) contributions — a percentage of pensionable earnings.
- Employment Insurance (EI) premiums — a percentage of insurable earnings, up to an annual maximum.
These are called source deductions. The money isn't the employer's — it's held in trust for the CRA from the moment it's withheld.
The employer's own portion
On top of what's withheld from employees, the employer contributes its own share. The corporation matches the employee's CPP contribution, and pays an additional employer share of EI premiums at a higher rate than the employee portion. Both the withheld amounts and the employer's matching amounts are remitted together — payroll remittance is never just what came off the employee's cheque.
Every corporation’s situation is different. Book a free 30-minute consult with a CPA and get a straight answer — plus a fixed quote before any work starts.
Remitter types and how often you remit
CRA assigns every payroll account a remitter type, which determines how often remittances are due — monthly, more frequently for larger payrolls, or less frequently for smaller, newer employers. Your remitter type isn't fixed forever; CRA can reclassify it as your average withholding amounts change. Missing the deadline for your assigned frequency triggers penalties and interest, separate from any T4 filing issues.
T4 filing at year-end
After the calendar year ends, employers issue a T4 slip to each employee summarizing their pay and the amounts withheld, and file a T4 summary with the CRA, generally by the last day of February. The totals on those T4s should reconcile to what was actually remitted throughout the year — which is much easier when payroll has been tracked properly all along rather than reconstructed in January.
Why directors carry personal liability here
Incorporation generally shields owners from the corporation's debts. Payroll source deductions are a notable exception. Because withheld income tax, CPP and EI are treated as held in trust for the CRA rather than as corporate funds, a corporation that fails to remit them can expose its directors personally — even after the business becomes insolvent or winds down. Directors can sometimes defend against this by showing they exercised proper due diligence, but the safest position is simply never falling behind on remittances in the first place.
The bottom line
Payroll is one of the few corners of running a corporation where a compliance slip becomes a personal problem, not just a business one. Setting up the RP account correctly, remitting on schedule, and reconciling to your T4s each year removes that risk entirely — and it's exactly what we manage as part of our bookkeeping and payroll service.
This article is general information for Canadian business owners and is current as of July 2026. It is not tax, legal or accounting advice, and it does not create a client relationship. Tax rules change and your situation is unique — please speak with a CPA before acting on anything here.
Founder of EverStone CPA, an Abbotsford CPA firm, and a member of the Chartered Professional Accountants of British Columbia (CPABC). Sunny works with incorporated contractors and small business owners across Canada on tax, bookkeeping and advisory. More about Sunny →
Frequently asked questions
What is a CRA payroll (RP) account?+
What source deductions do employers have to withhold?+
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When are T4 slips due?+
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