Once payroll is processed, you still have one more critical step before the books are accurate: recording the actual remittance to CRA. This is where many small businesses go wrong — they treat the remittance like an “expense,” when in reality, it’s a liability being paid down. Until you remit to CRA, those source deductions (CPP, EI, and the employee’s withheld income tax) are amounts you owe the government. They sit on the balance sheet, not the profit & loss.

When you submit your payroll payment to CRA (either through My Business Account, Wagepoint, or your bank), you need to reflect that in QuickBooks as a payment against liability, not as a new expense.

The correct workflow looks like this:

1. Run payroll as usual, which automatically creates the liabilities.
2. Check your “Payroll Liabilities” or “Source Deductions Payable” account — this represents what is owed to CRA.
3. When you make the remittance, record it as a liability payment, not an expense.
4. After posting the payment, the liability account decreases to zero for that month (assuming no balance carry-forward).

This ensures:

• Your payroll expense is already recorded at the time of the pay run (where it belongs).
• CRA payments don’t inflate your operating expenses twice.
• The balance sheet accurately shows amounts owed until CRA is paid.
• Your books stay aligned with your T4 and annual payroll summaries.

This distinction matters most during year-end and during CRA reviews. If remittances are posted incorrectly as expenses, it leads to overstated deductions and reconciliation problems later.

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