Most owners treat payroll remittance as an administrative chore. The CRA does not, and the gap between those two views is where the money goes.
The mechanics are simple. When you pay someone, you withhold income tax, CPP and EI, and you send that money to the CRA on a schedule set by the size of your payroll. The withheld portion was never yours. It belonged to your employee and to the CRA from the moment payroll ran.
That framing explains the penalty. A late remittance is not treated as a late bill. It is treated as holding money that was not yours to hold.
So being late by a few days is not a rounding error. The penalty scales with how late you are, and at eight days it reaches ten percent of the amount you failed to remit. Not ten percent a year. Ten percent of the amount.
The part that surprises people is what comes next. If the corporation cannot pay, the CRA can assess the directors personally. Incorporation does not wall this off the way it walls off ordinary trade debt. A director who never touched the bookkeeping can still be assessed for source deductions the company failed to send.
Three habits prevent almost all of it.
Know your remitter type. It sets your due dates, and it changes as payroll grows. Plenty of owners are still remitting on the schedule they were assigned years ago.
Separate the money. Withheld deductions sitting in the operating account get spent. Almost nobody does this on purpose. It happens because the balance looks like working capital.
Reconcile monthly, not at year end. An error found in February costs a correction. The same error found the following February has been compounding for twelve months.
None of this needs clever planning. It needs the boring version of bookkeeping, done on time.
I wrote a longer version, which goes further into the director liability question, here: https://khaledhawari.ca/khaled-hawaris-expertise-in-risk-management-in-ottawa/
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