US vs Canadian Payroll: What Expats Need to Know
By Markie Antle, CPB — Go Fig Bookz
Running payroll in one country is a compliance checklist. Running it in two is two different checklists that look deceptively similar — same idea, different agencies, different deductions, different deadlines, different year-end slips. Here’s the practical map.
One ground rule before anything else: where the employee works determines whose rules apply — not where the company is incorporated. A Canadian company with a US-resident employee has US payroll obligations, and vice versa.
The Canadian side (CRA)
Employers withhold three things from every paycheque:
- Income tax (federal + provincial, one combined withholding)
- CPP — Canada Pension Plan contributions, matched by the employer
- EI — Employment Insurance premiums, with the employer paying a higher multiple of the employee amount
Withholdings get remitted to CRA on a schedule set by your remittance size — most small employers remit monthly, due the 15th of the following month. This deadline deserves respect: CRA treats unremitted source deductions as trust money, and directors can be held personally liable for arrears. It’s the one payroll deadline you never float.
Year-end means T4 slips to employees and the T4 summary filed with CRA by the last day of February. When someone leaves, a Record of Employment (ROE) has to be issued promptly — it’s how they claim EI. Depending on your province and industry, add workers’ compensation (WSIB in Ontario) and possibly EHT (Employer Health Tax).
The US side (IRS + state)
The same paycheque in the US carries:
- Federal income tax withholding
- FICA — Social Security and Medicare, split between employee and employer
- FUTA — federal unemployment tax, employer-paid
- State obligations — income tax withholding in most states, state unemployment insurance in all of them, each with its own registration and filings
Federal reporting runs through quarterly Form 941 filings with deposits on an IRS-assigned schedule. Year-end means W-2s to employees by January 31 — a month earlier than Canada’s T4 deadline, which catches cross-border employers every year. Contractors get 1099-NEC instead (Canada’s rough equivalent for construction subs is the T5018).
Where cross-border employers actually get burned
- Treating the systems as interchangeable. CPP is not Social Security; EI is not SUI. Rates, caps, and employer multiples all differ — payroll software configured for the wrong country produces confident, wrong numbers.
- Missing state-level registration. The IRS is only half the US story. Each state where an employee works generally wants its own registration before the first paycheque.
- The January 31 vs February 28 gap. Two year-end deadlines a month apart, in two systems. Calendar both — our tax calendar has them side by side.
- Contractor misclassification. Both CRA and the IRS look hard at “contractors” who work like employees, and reassessment with penalties is expensive in either country.
The sane way to run it
Keep each country’s payroll in a system built for that country, remit on each agency’s schedule, and reconcile payroll liabilities in the books monthly so what you withheld, what you remitted, and what you reported at year-end all agree. That last step is the difference between year-end taking a day and taking a month.
Cross-border payroll is one of our core services — we run both Canadian and US payroll for small businesses, including remittances, T4s, W-2s, ROEs, and the state-level pieces. See services and pricing, or book a free call if you’re about to hire your first employee on the other side of the border — an hour of setup beats a year of fixing.