CRA Accounts
When Do I Need a CRA Payroll Account?
Find out when do I need a payroll account at the CRA: hiring your first employee, sole proprietor draws, contractors, and the deductions you must remit.
The short answer to “when do I need a payroll account” is: as soon as you pay an employee. A CRA payroll account — known as an RP account — is required when you pay salary, wages, bonuses, commissions, vacation pay or taxable benefits to someone who is an employee. That usually means hiring your first employee, and there is generally no minimum headcount or revenue threshold. If you only take money out of an unincorporated sole proprietorship for yourself, you normally do not need one.
What a CRA Payroll Account Actually Is
A payroll account is not a stand-alone registration or a separate login. It is a program account attached to your nine-digit Business Number (BN) and identified by the RP program code. Your BN is the umbrella number used for federal business programs, and other accounts are added under the same BN with different program codes.
Because of that, opening a payroll account is usually a short addition to a step you have already taken. If you do not have a BN yet, you can request one at the same time you register for payroll. See how to get a Business Number in Canada and how a BN differs from a GST/HST number.
The Payments That Trigger a Payroll Account
You generally need a payroll account when you pay any of the following to an employee:
- Salary, hourly wages, overtime and shift premiums
- Bonuses, commissions and profit-sharing payments
- Vacation pay, statutory holiday pay and severance or retiring allowances
- Taxable benefits, such as a company vehicle, group life insurance, or an allowance that is not a reasonable reimbursement
Certain other payments can also create withholding obligations. Director’s fees, for example, are typically treated as pensionable and insurable remuneration. If you are unsure whether a specific payment is pensionable, insurable or taxable, confirm the treatment on the CRA website or with an accountant before you pay.
When You Do Not Need a Payroll Account
Not every payment to another person creates payroll obligations. Common situations where a sole proprietor does not need an RP account include:
- Owner’s draws. An unincorporated sole proprietorship and its owner are the same legal person, so taking money out of the business is a draw, not wages. Those amounts are reported as business income on your T2125, not on a T4.
- Genuine independent contractors. If a worker operates their own business, invoices you and controls how the work is done, you generally pay a fee rather than wages — though the working relationship matters more than the label.
- GST/HST on your sales. Collecting and remitting GST/HST is a separate program account and has nothing to do with payroll.
Worker classification is the real risk. If the CRA later decides a contractor was an employee, you can be assessed for the source deductions you failed to withhold, plus penalties and interest.
Sole Proprietors, Employees and Your Own Pay
A sole proprietor cannot pay themselves a salary — there is no separate legal entity to act as the employer. You hire employees in your own name, and your own compensation stays as draws. A corporation is different: it is a separate taxpayer, and paying yourself a salary from it requires both a payroll account and T4 reporting. If you are weighing the two, see sole proprietorship vs corporation.
If you do hire, the rules apply from day one. There is no small-employer exemption from withholding. Read can a sole proprietorship have employees for the wider employment obligations.
What You Withhold and Remit Once You Register
| Payment or situation | Payroll account needed? | Why |
|---|---|---|
| Wages or salary to an employee | Yes | CPP, EI and income tax must be withheld at source |
| Owner’s draw from a sole proprietorship | No | Reported on the T2125 as business income |
| Director’s fees | Typically yes | Often pensionable and insurable — confirm |
| Invoice from an incorporated contractor | No | The contractor runs its own payroll |
| Invoice from an unincorporated contractor | Usually no | Depends on the classification test |
| GST/HST collected on sales | No | Separate GST/HST program account |
Once registered, you withhold CPP contributions, EI premiums and income tax from each pay, add the employer’s share of CPP and EI, and remit the total to the CRA. Those withheld amounts are held in trust — they are not your money to spend on operating costs, even temporarily. Each year you issue T4 slips to employees and file a T4 Summary, and you issue a Record of Employment when an employee has an interruption of earnings. Your remitting frequency is set by the CRA based on average monthly withholding; confirm your remitter type in CRA My Business Account.
How and When to Register
Register before your first payday. You can add a payroll account online through CRA My Business Account, or through the CRA business registration service if you do not have a BN yet. The process asks for your business details and an estimate of your payroll. The step-by-step walkthrough is in how to register for a CRA payroll account.
If you have already paid someone before registering, register as soon as possible and remit what you owe — waiting does not remove the obligation. Late remittances and late-filed T4 information returns can attract penalties and interest. As of the current tax year, the cleanest approach for a new sole proprietor is to register the payroll account in the same week you issue the first offer of employment, and to keep payroll records separate from personal banking.
Frequently asked questions
Do I need a payroll account if I am the only worker in my sole proprietorship?
Generally no. An unincorporated sole proprietorship is not a separate legal person, so you cannot be your own employee and you do not pay yourself wages. Money you take out is a draw, reported on your T2125 as business income. A payroll account becomes necessary only when you pay someone else who is an employee. If you incorporate later and take a salary, you will need one.
When should I register for a CRA payroll account?
Register before your first payday, not after. You can add the RP program account online through CRA My Business Account, or use the CRA business registration service if you do not have a Business Number yet. If you have already paid an employee, register as soon as possible and remit the deductions you should have withheld — the obligation does not disappear because registration was late.
What payroll deductions do I withhold as an employer?
Once registered, you withhold CPP contributions, EI premiums and income tax from each employee’s pay, then add the employer’s share of CPP and EI before remitting to the CRA. Withheld amounts are held in trust. Each year you also issue T4 slips and file a T4 Summary, and you issue a Record of Employment when an employee has an interruption of earnings. Confirm current rates and remitter types on the CRA website.
Do I need a payroll account if I hire independent contractors?
Usually not, provided they are genuine independent contractors who run their own business, invoice you and control how the work is done. The wording of your contract is not what decides it — the CRA looks at the actual working relationship. If the CRA reclassifies a contractor as an employee, you can be assessed for unremitted CPP, EI and income tax plus penalties and interest.