CCPC and Unremitted Source Deductions

by Peggy
(Alberta, Canada)

I have a new client. It is a corporation with only one director/shareholder. This is the first year of operation. The year end is September 30.

I have been given 10 months worth of receipts. The owner-manager initially decided to do their own bookkeeping and payroll. Unfortunately advances were taken most months instead of payroll cheques that included source deductions. The owner-manager tried to backtrack and calculate the source deductions after the fact.

The amount of the advances were all different as well as the dates that they were taken. Only five source deductions have been remitted and I have not been provided all of the backup (yet) which would enable me to determine what is actually owed to CRA. I can't figure out how the owner-manager determined the amount of the source deductions.

This is my first time doing payroll so it's all new to me. I need some basic advice. I don't think I can say the pay periods were monthly because in some months 2 or 3 advances were taken. How do I determine the pay period frequency when the advance were so inconsistent? I'm using Simply Accounting, but none of the payroll has been posted yet.

Hi Peggy,

Wow, this is not a great way to learn payroll. I am not familiar with Simply Accounting as I use QuickBooks ... but if this were me, I'd be tempted to do payroll manually so you can match what actually took place easily and quickly.

I'd start by using CRA's online payroll deductions calculator (PDOC). I'd input each advance into the PDOC to figure out the appropriate deductions. I wouldn't bother wasting my time trying to back into a net amount. I'd select 12 pay periods for this purpose and total all the advances made during a particular month to input into the PDOC.

Armed with this information, I'd then make a journal entry (using a payroll clearing account) to book the payroll bookkeeping entries in the applicable month. Then I'd record the advances paid (cheques issued, cash withdrawn, bank transfers made) with the offset to the payroll clearing account.

Are you with me so far? Using this method, you don't have to try and figure out what was done. The clearing account will explain everything that happened. What's left is what is due to CRA.

I would back up the bookeeping entries with an Excel spreadsheet so you know how much to remit to CRA and what the payment owing is made up of. The amount should equal the balance in the payroll clearing if everything is done correctly.

There will likely be penalties and interest for late filing and payment; and a PIER report may also be issued ... but that can be dealt with when and if it happens.

With regards the payroll period, if there is an RC59 - Business Consent Form on file with CRA, you can call CRA (or go online if you have the proper access authorized) and ask what the payroll period is. Your remitter type is based on your AMWA. As this is the first year of operation, the remitter type assigned is probably monthly.

If this is the case, a PD7A should be completed and filed with CRA for each month, even if it is nil in any given month.

Follow the PIER link above to see how to deal with any over or under CPP payments. Remember too that owner-managers are NOT eligible for EI unless they have applied for the voluntary EI program.

For the current year, try to see if the owner-manager would be willing to take a regular, reasonable paycheque twice a month ... reasonable meaning one the company can sustain. If advances are needed, they can be tracked and deducted from the appropriate pay cheques just as you would with a regular employee.

I hope I haven't missed anything. Of course, I'm ignoring other remuneration options that may be available to owner-managers. Good luck and post back if you need further clarification on anything.




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