Income Tax - Payroll Deductions

Under the Income Tax Act, an employer is required to withhold any amounts relating to income tax from an employee's pay cheque. As an employer, you are holding these deductions in trust for your employees; therefore, you are expected to keep these funds separate from the operating funds of your business.

If you do not withhold these amounts, or do not remit them to the Canada Revenue Agency (CRA) when required, you will be subject to certain penalties.

If you are self-employed, you do not have tax deducted from your income.

The CRA offers payroll deduction tables that contain information to help you calculate Income Tax deductions. These are available on paper or diskette from your tax services office or tax centre. You may also download them directly from the CRA Web site.

For more information on the above, please contact a Business Enquiries of the CRA (see Related Reading: Business Window - Supplement or CRA's Web site for a list of addresses).