Late Payroll Remittance Penalties
CRA penalties for late or missing payroll remittances, failure to deduct, interest at 7%, directors personal liability, and how to get penalties reduced.
The short version
- Late payroll remittances cost 3% if 1 to 3 days late, 5% for 4 or 5 days, 7% for 6 or 7 days, and 10% after that. Repeated failures in the same year, made knowingly or with gross negligence, can cost 20%.
- CRA generally applies the late remittance penalty only to the part over $500, unless the failure was deliberate.
- Not deducting at all is worse: 10% of what should have been deducted, and the employer pays both the employee's and employer's share.
- Interest runs on top at CRA's prescribed rate, 7% for October to December 2026, compounded daily, on the penalties too.
- Directors of a corporation are personally liable for unremitted source deductions, for up to two years after they resign.
Late Payroll Remittance Penalties
CRA forgives a lot of things eventually. Payroll isn't one of them. The tax you deduct from an employee's pay isn't your money; you're holding it in trust, and CRA treats a late remittance the way a bank treats a cheque that bounces from the trust account. The penalties start small and climb by the day. For a corporation, they eventually climb right past the company and onto the directors personally.
Penalty Table
| What went wrong | Penalty |
|---|---|
| Remitted 1 to 3 days late | 3% |
| 4 or 5 days late | 5% |
| 6 or 7 days late | 7% |
| More than 7 days late, or never remitted | 10% |
| Second or later failure in the same year, knowingly or by gross negligence | 20% |
| Didn't deduct CPP, EI or tax at all | 10% of the amount not deducted (20% if repeated), plus the amounts themselves |
| Large remitter not paying through a Canadian financial institution | Up to 10% |
| T4 slips filed late | From $100, scaled by the number of slips; see T4 filing |
Due dates by remitter type: payroll basics. General penalty and interest rules: penalties and interest.
Behind on payroll remittances?
Tell the assistant how many remittances were missed or late, the amounts, and whether you run a corporation. It estimates the penalties and interest, the director exposure, and the best order to fix things in.
Example: One Late Remittance
| Amount | |
|---|---|
| Remittance due on the 15th | $9,000 |
| Paid on the 20th, 5 days late | 5% penalty |
| Penalty on the amount over $500 | 5% x $8,500 = $425 |
| Interest at 7% for 5 days | about $9 |
| Total for five days | about $434 |
Leave it past day seven and the penalty doubles to about $850. Do it twice in a year knowingly and it can be 20%. The fix is boring and effective: pay on the payroll date, not the due date.
Directors' Personal Liability
- Who: anyone who was a director when the corporation failed to deduct or remit, including "silent" family directors.
- What: the unremitted source deductions plus related interest and penalties. Net GST/HST has a similar rule.
- Defence: due diligence. You must show you took steps to prevent the failure, not just to fix it afterward.
- Time limit: CRA must assess within two years after you stop being a director. Resigning doesn't erase the past two years.
- Bankruptcy doesn't help much: deductions withheld are a deemed trust and come ahead of most creditors.
More on CRA collections and what to do if they're at the door: tax debt.
Getting Penalties Reduced
- Pay first. Interest keeps running on penalties until everything is paid.
- Ask for taxpayer relief on form RC4288 if the late payment was caused by circumstances beyond your control, like a serious illness, a disaster, or a CRA error. Requests are limited to the past 10 years; see taxpayer relief.
- Come forward before CRA finds it. The voluntary disclosures program may help in some cases, with limits for amounts that were withheld and not remitted.
- Set up a payment arrangement if you can't pay at once; see payment arrangements.
- Fix the cause: a payroll service, automatic remittances, or a separate account for deductions.
Payroll Penalty Questions
What is the penalty for late payroll remittances in Canada?
3% if 1 to 3 days late, 5% for 4 or 5 days, 7% for 6 or 7 days, and 10% if more than 7 days late or not remitted. A 20% penalty can apply to a second or later failure in the same year made knowingly or with gross negligence.
Does CRA charge the late remittance penalty on small amounts?
CRA generally applies it only to the part of the late amount over $500, unless the failure was made knowingly or with gross negligence.
What interest does CRA charge on late payroll remittances?
The prescribed rate for overdue amounts, 7% for October to December 2026, compounded daily, on the late amount and on penalties.
Are directors personally liable for unpaid payroll deductions?
Yes. Directors can be held jointly liable for unremitted source deductions, interest and penalties unless they show due diligence. CRA must assess within two years after a person stops being a director.
Can CRA waive payroll penalties?
CRA can cancel or reduce penalties and interest under the taxpayer relief provisions when the failure was caused by circumstances beyond your control, financial hardship, or CRA delays or errors. Apply on form RC4288.
Sources: CRA, When to remit source deductions; CRA, Interest rates for the fourth quarter of 2026; Income Tax Act, section 227.1 (directors). Checked October 2026. The $500 threshold is CRA's administrative policy. Penalties under provincial payroll programs and workers' compensation are separate. The example rounds interest.
Last reviewed October 5, 2026 against CRA and Government of Canada sources. How we check our facts.