How do I set up payroll for the first time in Canada

Short answer

Register for a payroll (RP) program account with the CRA, collect a TD1 form from each employee, then withhold income tax, CPP and EI from every pay and remit it by the 15th of the following month. You also issue T4 slips by the end of February.

Register for a payroll account

Before you can pay anyone, you need a payroll (RP) program account under your business number with the CRA. If you already have a business number for GST/HST or corporate tax, you simply add an RP account to it. If not, you register for the business number and the payroll account together.

This applies the moment you pay a salary to anyone, including yourself as an owner drawing a salary from your corporation. Paying wages without a payroll account and remittances is one of the most common early compliance failures.

Collect the right forms from each employee

Every employee completes a federal and provincial TD1 when they start. These declare their personal tax credits and tell you how much income tax to withhold. An employee who does not complete one is withheld at the basic amount.

You also need each employee's SIN and banking details for direct deposit. Keep these on file; they support the amounts you remit and the T4s you eventually issue.

Withhold the three amounts from every pay

On each pay you withhold and track three things:

Income tax, based on the employee's TD1 and pay
CPP contributions, on earnings above the annual basic exemption up to the yearly maximum
EI premiums, up to the annual maximum insurable earnings

The employer also pays its own share: 100% of the employee's CPP amount is matched, and EI is matched at 1.4 times the employee's premium. The CRA's payroll deductions calculator, or payroll software, computes all of this per pay period.

Remit on time, every time

The tax, CPP and EI you withheld, plus the employer's share, must be remitted to the CRA. For a new or small employer, the deadline is generally the 15th of the month following the pay. Larger employers face accelerated schedules, remitting more frequently as their payroll grows.

These are trust funds, and the penalties for late remittance are among the harshest in the tax system: up to 10% for a single failure and 20% for a repeat, plus personal director liability. This is the single most important date to never miss.

Year-end: T4 slips and summary

After the calendar year ends, you prepare a T4 slip for each employee summarising their earnings and deductions, and a T4 Summary totalling them. Both are filed with the CRA and the slips given to employees by the last day of February.

The T4s must reconcile to what you actually remitted through the year. Discrepancies between remittances and T4s are a common trigger for CRA follow-up, which is why accurate per-pay records matter all year, not just at February.

Primary source

Income Tax Act, s. 153 Withholding

Reviewed for the 2025 tax year by Udit Gupta, Certified Tax Accountant. General information, not advice for your specific situation — book a free 15-minute call to discuss your circumstances.

Payroll Support: Frequently Asked Questions

Common questions regarding our compliance workflows and service guarantees.

Yes. Paying yourself a salary from your corporation requires a payroll account, per-pay withholdings, remittances and a T4, exactly as for any other employee.

For most new and small employers, by the 15th of the month after the pay. Larger payrolls move to accelerated, more frequent remittance schedules set by the CRA.

A genuine contractor is not on payroll, but the CRA tests the actual relationship. Misclassifying an employee as a contractor to avoid payroll can lead to assessments for the unremitted amounts plus penalties.

Up to 10% for a single failure and 20% for a repeat in the same year, plus interest. Directors can be held personally liable for unremitted source deductions.

Bonuses are subject to the same withholdings, though there are specific methods for calculating the tax on lump-sum payments. CPP and EI still apply up to the annual maximums.

Yes. We set up the account, run each pay cycle, remit on time, and file the T4s, so the deadlines are handled rather than left on your calendar.

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Reviewed and fact-checked by Udit Gupta

Ex Big 4 — Ernst & Young, Deloitte · International & cross-border tax specialist · CPA Canada (In-Depth Tax Program) · Chartered accountant, ICAI & MIA

Udit Gupta has over 15 years of experience helping corporations and business owners with corporate structuring, corporate tax filing, bookkeeping, payroll, GST/HST, cross-border tax and CRA representation. Big 4 trained at Ernst & Young and Deloitte, and qualified as a chartered accountant in India and again in Malaysia, he founded his accounting practice in 2014 to serve entrepreneurs, startups and non-resident business owners across Canada. View full member bio.

The Institute of Chartered Accountants of India — member 521458 · Malaysian Institute of Accountants — member CA 44667 · Ex Big 4: Ernst & Young, Deloitte · CPA Canada (In-Depth Tax Program), completed 19 Dec 2023 · In-Depth GST/HST Part I, 12 Jul 2022 · Part II, 5 Jul 2023

Editorial policy. Every page is researched against primary sources — the Income Tax Act, CRA publications and CPA Canada guidance — and every rate or threshold is stated with the tax year it applies to.