How Federal Payroll Deductions Work

• Open a payroll account;
• Obtain your employees' social insurance numbers and ask them to complete federal Form TD1.
• Calculate and deduct CPP contributions, EI premiums, and income tax deductions based on the amounts paid to your employees. You will also calculate your share of the CPP and EI contributions. There are commercial payroll businesses that will calculate the appropriate deductions and contributions for you. The CRA website also has a useful On-line payroll deduction calculator.
• Remit the deductions along with your share of the CPP and EI.
• Report the income and deductions on the appropriate information return.
• Keep proper records.  The records must include the hours worked by each employee, the amounts withheld for CPP, EI and income tax.