CRA Payroll Remitter Types: When to Switch (2026 Guide)

This article is for informational purposes only and does not constitute tax or financial advice. Consult a qualified accounting professional before making any tax or financial decisions.

Quick Answer

Your business must switch to accelerated payroll remittances when your average monthly withholding amount (AMWA) from two calendar years ago exceeds $25,000.
AMWA of $25,000 to $99,999.99 places you in Threshold 1: remit twice a month, by the 25th of the current month and the 10th of the following month.
AMWA of $100,000 or more places you in Threshold 2: remit up to four times a month, within three working days after each of four defined pay periods ends.
The CRA reviews every payroll account each November and mails a written notice if your remitter type changes for the next calendar year.
Remitting on the wrong schedule triggers penalties of 3 to 10 percent per late payment, doubling to 20 percent for a repeat offence in the same calendar year.

Why remitter-type changes catch Ontario employers off guard

Every November, the Canada Revenue Agency (CRA) reviews every active payroll account in the country. If your business crossed a withholding threshold two years earlier, a letter typically arrives by December telling you your remitter type has changed effective January — no phone call, no warning email.

For Ontario small business owners, the shock is usually cash flow. A company that remitted on the 15th of each month suddenly needs funds available on the 25th and again on the 10th, with penalties added if a deadline slips.

Understanding how the CRA classifies remitter types is the first line of defence. For a broader payroll compliance overview, see our Ultimate Guide to Managing Payroll in 2026 (Canada).

$25KAMWA entering Threshold 1

$100KAMWA entering Threshold 2

NovCRA reviews payroll accounts annually

10%Penalty at 8+ days late

Quick start: pick your path

Direct AnswerThe right remitter category depends on your average monthly withholding amount (AMWA) from two calendar years ago. Below $3,000 with a clean record: quarterly. Below $25,000: regular monthly. Between $25,000 and $99,999.99: Threshold 1. At $100,000 or more: Threshold 2.

New employer or sole proprietor

New employers with no full-year history typically start as regular monthly remitters. Sole proprietors with one or two staff usually stay quarterly or regular while monthly withholdings remain under $3,000.

SME approaching $25,000 AMWA

Growing businesses should watch the two-year lookback. The switch from regular monthly to Threshold 1 arrives with little warning and doubles your remittance frequency overnight.

Employer already at Threshold 2

You cannot voluntarily downgrade if payroll shrinks temporarily. The annual November review is the only formal path back to a lower category, and only if last year’s AMWA supports the move.

Associated corporation group

Related corporations combine AMWAs under Income Tax Act rules. Every payroll account in the associated group carries the same remitter type based on the combined amount, not each company’s individual withholdings.

How the CRA calculates your AMWA and when it reviews

Direct AnswerThe CRA calculates your average monthly withholding amount (AMWA) using the total payroll deductions you remitted two calendar years ago, divided by the number of months in that year with a remittance. Every November, the CRA reviews all payroll accounts and sets your remitter type for the following year.

Take a Toronto marketing agency that remitted $198,000 in payroll deductions across 11 active months of 2024. Dividing $198,000 by 11 gives an AMWA of $18,000 — placing the agency in the regular monthly category for 2026.

The two-year lookback matters. Your 2026 remitter type is set by 2024 numbers, not 2025 — giving disciplined businesses time to plan, but also meaning a rapidly-growing 2025 will not affect remittance frequency until January 2027.

Verify your assigned remitter type at any time through CRA My Business Account. For a walkthrough, see our Practical Guide to CRA My Business Account.

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The CRA payroll remitter review cycle (2024 → 2026)

AMWA is calculated on 2024 data, reviewed each November, and applied to remitter type from the next January.

Nov

CRA reviews all payroll accounts

2 yrs

Lookback period for AMWA

Jan

Effective date of any change

Source: Canada Revenue Agency – Types of remitters (canada.ca) · ClearWealth Accounting Advisors · clearwealth.tax · For informational purposes only.

The four CRA remitter types compared

Direct AnswerThe CRA maintains four payroll remitter categories: quarterly for eligible small employers, regular monthly, accelerated Threshold 1, and accelerated Threshold 2. Each has its own AMWA range, frequency, and due date rules. Misclassification is expensive; the CRA does not warn before charging a late-remittance penalty.

Remitter type	AMWA range	Frequency	Due date rule
Quarterly (small employer)	Under $3,000 with perfect compliance	4 times per year	15th of the month following each quarter-end
Regular (monthly)	$0 to $24,999.99	12 times per year	15th of the following month
Accelerated Threshold 1	$25,000 to $99,999.99	Up to 24 times per year	25th of same month for paydays 1st–15th; 10th of next month for paydays 16th–end
Accelerated Threshold 2	$100,000 or more	Up to 48 times per year	Within 3 working days after periods 1st–7th, 8th–14th, 15th–21st, 22nd–end

There is also a ‘new small employer’ quarterly category, available to businesses whose monthly withholdings stay under $1,000 and who have a clean compliance record. Most Ontario SMEs do not qualify because the compliance bar is strict.

The jump from Threshold 1 to Threshold 2 is the sharpest cash-flow change of any transition — twice-monthly remittances become up to four per month, each anchored to a rolling business-day count rather than a fixed calendar day.

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Remittances per year by CRA remitter type

Crossing $25,000 or $100,000 in AMWA can multiply your payroll deadlines by 2× or 4×.

$25K

AMWA threshold entering T1

$100K

AMWA threshold entering T2

12×

Frequency jump: quarterly to T2

Source: Canada Revenue Agency – How and when to remit source deductions (canada.ca) · ClearWealth Accounting Advisors · clearwealth.tax · For informational purposes only.

When your business must switch: the trigger points

Three moments force a category change: crossing the $25,000 AMWA line (Regular to Threshold 1), crossing the $100,000 line (Threshold 1 to Threshold 2), or receiving the CRA’s T216 Accelerated Remitter Notification and Questionnaire.

The T216 typically arrives when the CRA suspects your withholdings will hit Threshold 1 or 2 for the first time. Return it promptly — ignoring the questionnaire can trigger automatic reclassification based on the CRA’s own estimate.

Associated corporations trip up many owner-managers. Related corporations under the Income Tax Act combine AMWAs for remitter-type purposes. A holding company at $60,000 and an operating company at $55,000 are each treated as Threshold 2 — not Threshold 1 — because the combined $115,000 crosses the higher line.

Payroll taxes are often the single largest recurring liability an Ontario SME faces. Our overview on Payroll Taxes: The Hidden Drag on Canadian Business Growth walks through the ripple effects.

Step-by-step: what to do when the CRA changes your remitter type

Direct AnswerWhen the CRA changes your remitter type, work through five steps in order: read the notification letter carefully, verify the classification through CRA My Business Account, update your payroll calendar, reconcile your PD7A statement of account, and adjust cash-flow forecasts before the first new due date arrives.

1
Read the notification letterOpen the CRA letter within a week of arrival. It states your new category, effective date, and remittance schedule — match these against your payroll calendar immediately.
2
Verify through CRA My Business AccountLog in and confirm the classification. If the CRA relied on incomplete data (for example, a payroll gap counted as a full month), the classification may be wrong and worth challenging.
3
Update payroll calendar and bankingThreshold 1 needs funding by the 25th and the 10th. Threshold 2 needs same-day funding for four deadlines per month, each anchored to a rolling three-working-day count.
4
Reconcile the PD7A statementAfter every remittance, compare what you reported with what the CRA received. Discrepancies compound quickly at accelerated frequencies and rarely resolve themselves.
5
Consider outsourcing payrollBookkeepers who manage multiple SME payrolls have systems built for accelerated deadlines. Weigh the fixed monthly cost against the risk of a single 10% penalty.

See The Pros and Cons of Outsourcing Bookkeeping and Payroll if you are weighing an internal versus outsourced payroll function.

The late-remittance penalty ladder

Direct AnswerThe CRA charges an escalating penalty on late payroll remittances: 3 percent for one to three days late, 5 percent for four to five days, 7 percent for six to seven days, and 10 percent for anything more than seven days. A second late remittance in the same calendar year may be assessed at 20 percent, plus compound daily interest.

An Ontario contractor remitting $45,000 who misses the deadline by four days faces a 5 percent penalty — $2,250 on the balance owing, plus compound daily interest. A repeat late remittance in the same calendar year could push the penalty to $9,000.

The CRA does not issue warnings and there is no grace period. The date counted is the date funds are received at the financial institution, not the date you initiated the transfer online. For a broader compliance framework, see our CRA Audit Business Checklist.

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CRA late-remittance penalty by days overdue

The penalty rate escalates every few days late — and doubles to 20% on a second offence in the same calendar year. Compound daily interest is charged on top.

3–10%

Standard late-remittance ladder

20%

Repeat offence, same year

0 days

Grace period

Source: Canada Revenue Agency – Failure to remit source deductions (canada.ca) · ClearWealth Accounting Advisors · clearwealth.tax · For informational purposes only.

Common mistakes Ontario employers make

→Ignoring the November notification letter. The CRA does not send reminders; if the letter is filed unread, the January change catches the payroll team on the wrong schedule.
→Continuing to remit on the old schedule after the effective date. Missing deadlines during the transition still triggers full penalties.
→Treating associated corporations as separate for remitter purposes. Combined AMWA across the related group sets the category for every payroll account.
→Using stale AMWA numbers to forecast cash flow. The 2026 classification is set by 2024 data, not 2025 — planning against the wrong year understates the coming schedule.
→Missing the three-working-day rule at Threshold 2. Saturdays, Sundays, and CRA-recognized public holidays do not count as working days.
→Failing to request a downgrade when payroll shrinks. Regular and accelerated remitters can call 1-800-959-5525 to request a remitter-type review if last year’s AMWA would lower their frequency.

For more on evolving CRA rules affecting Ontario SMEs, see New CRA Compliance Regulations: What Businesses Need to Know.

Frequently asked questions

When exactly does my business have to switch from monthly to twice-monthly payroll remittances?

You must switch to Threshold 1 the January after your AMWA from two calendar years ago reaches $25,000. The CRA notifies affected employers by mail following its annual November review.

How does the CRA calculate my average monthly withholding amount?

The CRA totals all payroll deductions you were required to remit in a calendar year, then divides by the number of months with a remittance. The result is your AMWA for the next classification cycle.

The CRA sent me a remitter-type change letter — what do I actually have to do?

Confirm the effective date, log into CRA My Business Account to verify the classification, update your payroll calendar, and adjust cash-flow projections. Request a review before the effective date if the classification looks wrong.

What is the difference between Threshold 1 and Threshold 2 accelerated remitters?

Threshold 1 covers AMWAs between $25,000 and $99,999.99, with remittances twice a month. Threshold 2 applies at $100,000 or more, with up to four remittances per month due within three working days of each period end.

If my payroll shrinks, can I ask the CRA to move me back to monthly remittances?

Regular and accelerated remitters can call 1-800-959-5525 to request a remitter-type review. The CRA may agree to a downgrade if last year’s AMWA would place you in a lower category.

Do associated corporations share the same remitter type?

Yes. Related corporations combine their AMWAs for classification. Every payroll account in the associated group carries the same remitter type based on the combined amount.

What penalty will I pay if I remit on the wrong schedule?

The CRA charges 3 percent for one to three days late, 5 percent for four to five days, 7 percent for six to seven days, and 10 percent for more than seven days. A second late remittance in the same calendar year may be assessed at 20 percent.

Where can I check my current remitter type online?

Your remitter type, frequency, and due dates are available through CRA My Business Account. Authorized representatives can view the same information through Represent a Client.

Get the classification right the first time

Payroll penalty stacking is silent and fast. A single missed remittance on an accelerated schedule can cost more than a full year of professional accounting fees. The CRA’s November review is predictable — but only if someone in the business is tracking AMWA year-round.

ClearWealth Accounting Advisors works with Ontario SMEs on payroll compliance, CRA correspondence, and remitter-type disputes. If you have received a change letter or are approaching a threshold, we will walk through your options before the deadline lands.

Received a CRA remitter-type change letter?

Talk to a ClearWealth advisor before the effective date. We handle the CRA correspondence, verify the classification, and rebuild your remittance calendar.

Book a Consultation

This article is for informational purposes only and does not constitute tax or financial advice. Consult a qualified accounting professional before making any tax or financial decisions.

Sources & References

Canada Revenue Agency — Types of remitters — https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/remitting-source-deductions/how-when-remit-more-information.html
Canada Revenue Agency — How and when to remit source deductions — https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/remitting-source-deductions/how-when-remit-due-dates.html
Canada Revenue Agency — Failure to remit source deductions — https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/remitting-source-deductions/failure-remit.html
Canada Revenue Agency — PD7A Statement of Account — https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/pd7a.html
Canada Revenue Agency — My Business Account — https://www.canada.ca/en/revenue-agency/services/e-services/e-services-businesses/business-account.html
Government of Canada — Income Tax Act — https://laws-lois.justice.gc.ca/eng/acts/i-3.3/

CRA Payroll Remitter Types: When to Switch (2026 Guide)

Quick Answer

Why remitter-type changes catch Ontario employers off guard

Quick start: pick your path

How the CRA calculates your AMWA and when it reviews

The four CRA remitter types compared

When your business must switch: the trigger points

Step-by-step: what to do when the CRA changes your remitter type

The late-remittance penalty ladder

Common mistakes Ontario employers make

Frequently asked questions

Get the classification right the first time

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