Did you know that many Canadian employers unintentionally overcharge for payroll tax each year—and leave that money with the CRA?

As a business owner running payroll in Canada, you’re probably used to the routine: calculate EI, CPP, income tax, remit to CRA every month or quarter, repeat. But did you know many employers overpay payroll source deductions without realizing it—and leave their money sitting at CRA year after year?

Yes, it happens more often than you think with overpaid payroll.

At KeWang Professional, we notice this especially for businesses using free payroll calculators or manually entering amounts. These tools don’t always track annual EI and CPP maximums properly—meaning your employees (and your business) might be contributing more than required.

Let’s break down what causes this and what you can do before year-end.

Why Overpayments Happen: EI & CPP Have Annual Maximums

Both Employment Insurance (EI) and the Canada Pension Plan (CPP) have annual contribution limits:

• Once the maximum EI amount is reached, no further EI should be deducted.

• Once the CPP maximum is reached, CPP should also stop for the rest of the year.

If you’re using a general payroll calculator instead of a full payroll system, the calculator doesn’t remember past pays, so it doesn’t know whether the maximum is already reached.

This means if you pay:

✔ A bonus ✔ A commission ✔ A year-end payment ✔ A large irregular amount

…your calculator may continue deducting EI and CPP even if the annual cap has already been met.

This is one of the most common causes of overpayment.

The Fix: Reconcile Your Payroll Before the Last December Pay

To avoid overpayments, always reconcile your EI and CPP totals before processing your final pay in December.

Ask yourself:

• Has this employee already reached the CPP maximum for the year?

• Has this employee already reached the EI maximum for the year?

• Did I pay any irregular amounts (bonus/commission) this year that weren’t included in the regular payroll schedule?

A proper payroll reconciliation will help you avoid unnecessary remittances—and avoid the hassle of refunds later.

What if You Already Overpaid? Check Your CRA Payroll Account

If you suspect you may have over-remitted payroll deductions this year or in prior years, log in to CRA My Business Account and look at your payroll program (RP) account.

Under your T4 Summary (previous years), you may see a CR (credit) balance.

A CR means:

👉 CRA owes YOU money.👉 The overpayment is refundable.

But there’s one catch…

CRA Will Not Automatically Refund Your Payroll Overpayment

Even though CRA shows a credit balance, they won’t just send you a cheque. Why?

Because CRA needs you to confirm the reason for the overpayment.

This is why they send a specific letter asking:

“Please explain the reason for the overpayment on your payroll account.”

Most employers don't respond—either they don’t understand the letter, or they assume CRA will fix it automatically. Without your reply, the credit just sits there, untouched.

The Only Step You’re Missing: Replying to CRA’s Letter

If CRA has already sent the inquiry letter, you simply need to respond with:

• The pay period(s) where overpayment occurred

• The reason, usually “CPP/EI exceeded annual maximum”

• Your request for CRA to apply the credit or issue a refund

  
  

Once CRA receives your explanation, the refund is processed, or the credit is applied to your next remittance.

If you didn’t receive the letter or missed it, you can still request a refund through My Business Account or by sending a written request.

Don’t Leave Money on the Table — We Can Help

Many small business owners unknowingly leave hundreds or even thousands of dollars in their CRA payroll account. A quick year-end payroll review can help you get that money back—and prevent overpayments from happening again.

At KeWang Professional, we can help you:

✔ Review your payroll EI/CPP contributions

✔ Identify CRA credit balances

✔ Respond to CRA inquiry letters

✔ Request refunds or apply credits

✔ Set up proper payroll systems to avoid future overpayments

Call to learn more about our services!

Contact Us Now!

If you want us to check whether you have unused payroll credits sitting at CRA, just contact us—we’ll help you get your money back where it belongs: in your business bank account.