Restaurant payroll without CRA letters

Four things put a restaurant on a government correspondence list, and the corporate return is none of them: a source-deduction remittance that landed late, tips run through payroll the wrong way, an ROE that never went to Service Canada, and February slips that don’t agree with what was remitted during the year. All four are calendar and classification problems, solved by a routine rather than a decision.

Source deductions run on a schedule the CRA assigns, and it moves

Source deductions are the income tax, CPP and EI withheld from each employee’s pay, plus the corporation’s own contributions on top. The employer’s CPP matches the employee’s; its EI premium is a CRA-set multiple of it. That EI line separates a restaurant’s payroll from an owner-only one: an owner who controls the corporation is generally not insurable, so an owner-only payroll carries none of it. A dining room does.

When it is due depends on your remitter type, which the CRA assigns from your average monthly withholding over a look-back period. A small payroll starting out can qualify to remit quarterly. Most restaurants are regular remitters, with a month’s withholdings due by the 15th of the following month. Above a threshold you are moved to an accelerated schedule falling more than once a month, and nothing in the pay run signals the switch — the notice does, months earlier.

The penalty for missing the date is charged on the amount you failed to remit, not on the tax you eventually owe, and it escalates for repeat failures. Withholdings are money held in trust, collected on the CRA’s behalf and never the corporation’s — which is why a director can be assessed personally for them, and why collection starts sooner than on income tax.

Tips fall into two piles, and only one of them is payroll

The dividing line is control, not the payment method.

Controlled tips are the ones the business takes possession of or decides the destination of. A mandatory service charge on a party of ten’s bill. A tip pool the house administers and redistributes on its own formula. Card gratuities paid out through the pay run. Those are generally employment income paid by the employer: pensionable, insurable, withheld on, in the payroll register, on the T4 — the slip covering employment income.

Direct tips go from customer to server without the business controlling where they land — cash left on the table, or a tip-out the house does not administer. Those generally carry no source deductions. They stay fully taxable to whoever received them, who reports them on their own return and can generally elect to contribute CPP on tips nobody withheld from. Untaxed at source does not mean untaxable.

Payment by card does not settle it. A card tip paid out the same night at the server’s own direction reads differently from the same money pooled and allocated by a manager, and provincial employment-standards rules on tip pooling can move a policy from one pile to the other. When it goes wrong the assessment arrives years later, for both halves of the CPP and EI that should have been withheld, on staff who left two summers ago. Write the tip policy down and keep it with the payroll records.

Every departure is an ROE, and a restaurant has departures

A Record of Employment goes to Service Canada, not the CRA, on every interruption of earnings — generally seven consecutive days with no work and no insurable earnings. Quits, terminations, layoffs, a parental leave, a student going back to school, a server taking six weeks off in January: all of it, not only the departures that felt like departures.

The deadline runs from the end of the pay period the interruption falls in, not from the last shift; monthly and irregular pay periods run their own version of the rule. A patio season staffed by twelve students therefore produces twelve ROEs inside a fortnight in September, each carrying hours and insurable earnings that must agree with the payroll register. Get one wrong and the employee’s benefit claim stalls, Service Canada asks for an amendment, and the person phones the restaurant.

February is a headcount problem

T4s are filed with the CRA and given to the employee by the last day of February for the calendar year just ended, and the late-filing penalty on information returns is generally charged per slip. A restaurant running 34 people at any one time may have paid 60 across the year, and everyone paid in the calendar year gets a slip — including the dishwasher who lasted three weeks in July.

Two things break in February and both are fixed in December: staff addresses go stale, and social insurance numbers go missing. A slip you cannot deliver is still one you had to issue, and the reasonable-effort obligation to obtain a number carries its own charge.

The last test is arithmetic: the T4 summary has to agree with twelve months of remittances. Where it doesn’t, the CRA’s pensionable and insurable earnings review — the PIER, an automatic check of CPP and EI against reported earnings — returns the difference, usually on someone whose hours changed mid-year.

The CRA is not the only payroll account you have

Workers’-compensation premiums sit outside the CRA entirely. WSIB in Ontario, CNESST in Quebec, the equivalent board in your province: each has its own account, its own schedule and its own definition of assessable earnings — not the base you used for the CRA remittance. Rates follow industry classification, and food service carries its own.

Provincial payroll levies are the other account. Ontario’s employer health tax charges payroll above an exemption threshold, and several provinces run comparable levies under different names and bases. A second location in another province means two of everything provincial on one federal payroll account. A Quebec location goes further — QPP instead of CPP, withholding to Revenu Québec, parental-insurance premiums — a different monthly routine, not an adjustment to yours. Every rate and threshold here is provincial and moves.

A worked example: 34 staff across two locations, one month

Illustrative, round numbers, semi-monthly pay, both locations in the same province. Payroll runs on the calendar year whatever your fiscal year-end is. March gross wages come to C$118,000 across 34 people. The house administers the card tip pool and pays it out on the pay run: C$14,000 for the month. Cash tips kept by servers run about C$3,000 and never touch the business.

March produces:

• Two pay runs on C$132,000 of employment income — wages plus the controlled tips. Income tax, CPP and EI off the staff side, the corporation’s CPP and EI on top. The C$3,000 of direct tips appears nowhere in it.
• One remittance to the CRA by April 15 covering March’s withholdings and the employer’s share, as a regular remitter. Across the accelerated threshold, the same money is due twice inside March.
• Three ROEs to Service Canada: two servers who quit and a line cook whose hours stopped. Each runs on its pay period’s clock.
• A premium remittance to the provincial workers’-compensation board on assessable earnings, plus the provincial payroll levy where the payroll clears the exemption — two accounts, neither of them the CRA’s.
• A reconciliation: March POS gross sales tie to bank deposits, the C$14,000 of tips paid out clears the tip liability account to nil, and the payroll register ties to the remittance.

That last line is the habit worth building. Tips collected on cards are a liability rather than revenue — money the business is holding for staff — so booking them to sales overstates revenue and the GST/HST base. A voluntary gratuity is generally not consideration for a supply, so it carries no GST/HST; a mandatory service charge generally does. Where cash is involved the reconciliation is also the record: the CRA has indirect methods for testing reported income, and a documented monthly tie answers them early.

Two locations of one corporation generally sit on one payroll program account; splitting them is a reporting choice, not a second registration. A location across a provincial line changes the last two items on that list.

What Cadence does

We run the payroll end to end or work alongside the provider you already have, and either way the remittance dates, the T4s and the ROEs sit on the same filing calendar as your GST/HST and corporate instalments. The tip policy gets written down and applied the same way every pay period, cheaper than defending it later. Workers’-compensation and provincial payroll-levy accounts stay on that calendar too; which we prepare and which we coordinate varies by province, and we confirm it at the estimate. Remittances, slips and payroll accounts are GST/HST and payroll work; tying the POS, the payroll and the bank feeds together month by month is bookkeeping, scoped to how cleanly those systems already line up — which is the first conversation on most restaurant and hospitality files.