Articles

The penalty structure for late remittances escalates quickly: Days Late 1–3 days 3% 4–5 days 5% 6–7 days 7% More than 7 days 10% Repeat offences or gross negligence Up to 20% Interest compounds daily on overdue amounts at the prescribed rate plus 4%. For Q4 2025, the prescribed rate for overdue remittances is 7%.Late-filled T4 slips carry separate penalties starting at $100 per slip type, up to $2,500 per type.

The most important distinction is that trust examinations carry a unique risk: director’s personal liability. A regular income tax audit does not typically expose directors to personal liability for corporate tax debts, but a trust examination can if source deductions were withheld but never remitted.

Table: Key differences between a CRA trust examination and a regular tax audit. The most important distinction is that trust examinations carry a unique risk: director’s personal liability. A regular income tax audit does not typically expose directors to personal liability for corporate tax debts, but a trust examination can if source deductions were withheld but never remitted.

Trust examinations and PIER reviews are serious enforcement mechanisms, but they are largely preventable. The CRA has increasingly emphasized education and assisted compliance alongside enforcement the agency wants employers to get it right. Your best protection is disciplined payroll processing: accurate calculations using current rates, careful T4 preparation, regular reconciliation of remittances, and meticulous record-keeping. For directors, the stakes are personal the trust money withheld from employee paycheques is not yours and using it for any purpose other than remittance to the CRA can trigger liability that no corporate structure will shield you from. Review your payroll practices against the standards outlined here, address gaps before year-end, and treat every remittance deadline as non-negotiable.

Critical note: Payments must be received by the CRA by the deadline, not merely sent. Penalties escalate quickly: 3% for 1-3 days late, 5% for 4-5 days, 7% for 6-7 days, 10% after 7 days, and 20% for repeated failures—plus compound daily interest at roughly 9-10% annually. Directors can be held personally liable for unremitted amounts with no limit under the Income Tax Act.

Record of Employment (ROE) An ROE must be issued whenever an employee experiences an “interruption of earnings” seven or more consecutive calendar days with no work and no insurable earnings. This includes terminations, layoffs, resignations, and leaves. Electronic ROEs must be filed within five calendar days after the end of the pay period in which the interruption occurred: paper ROEs within five days of the first day of interruption. Employers issuing five or more ROEs annually must file electronically through ROE Web. Later filing penalties reach $2,000 per infraction.

Disclaimer: This article provides general tax information. Tax rules change frequently, and individual circumstances vary. Consult a qualified Canadian tax professional for advice specific to your situation.