Making a CRA Payroll Payment Under Protest

By L.Kenway BComm CPB Retired
This is the year you get all your ducks in a row! Start by starting ... and keep it simple. Consistency beats perfection.

Published August 7, 2026 | Revised August 10, 2026

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RELATED >> Compliance Filing Basics For Self-Employed Canadians

If you receive a notice of assessment (NOA) you disagree with, and it includes an amount owing with penalties and/or interest, here's what to do to stop the clock on further penalties and interest while you dispute it.

Hand on a stopwatch depicting stopping CRA interest charges

Stop the clock on penalty and interest charges by making a CRA payment under protest

Walking Through The Process

The example below walks through Tony's payroll (RP account) dispute, filed entirely through CRA My Business Account. Screen labels and available options may differ for other account types (like income tax or GST/HST) or if you file by mail.

Here's What Happened and What Went Wrong

What Happened

This example shows how a series of small, easy-to-make administrative errors can compound into a bigger CRA problem, especially if you are new to being an employer. None of the individual steps seemed particularly serious at the time. It was the way they interacted that created the assessment Tony eventually had to dispute. Here's his story.

Alex is featured throughout this site as a website designer and fictional solopreneur. At their regular coffee meet up last week, his friend Tony shared his CRA troubles.

Tony was a solopreneur with a website. He found the business website was taking up a lot of his time that he needed to spend on his business. In January, he decided to hire two part-time workers to help with website administration. So after interviewing, two written job offers were sent and formally accepted. Tony put them on the payroll in February. As it was a small payroll (monthly withholdings were under $1000), and he was a new small employer with a good compliance CRA record, Tony was sure he had read that his business qualified for a CRA reporting period based quarterly (April, July, October, January).

Tony submitted his first payroll report (January to March) through the CRA My Business online portal in mid-April, and arranged payment using CRA’s 'schedule a payment' option. That option has a 7-day delay built in, so his first payroll remittance payment arrived late.

About 10 days before the second quarter payroll report was due, Tony got a letter from the CRA requesting tax deduction, CPP and EI information. The letter informed him he was a monthly remitter and that he needed to send his remittance by the 15th of the month following the month he paid employees. The total remittance amount shown matched his first quarter payment. The letter asked him to respond through CRA's "Respond to notices" option if he hadn't already remitted.

Tony did as requested and submitted a response through the online portal explaining he wasn't aware he was a monthly remitter. He would begin remitting monthly with the July payroll, with the remittance due in August. Because he was now using a payroll service, he could not stop the second quarter reporting (April to June) and payment as it had already been queued for processing before he could update his account.

The second quarter filing was filed and paid on time in mid July by the payroll provider.

A week later an assessment letter arrived. Tony was not checking his online portal regularly and didn't remember receiving a CRA Mail alert. Tony received the assessment in the mail the first week in August. It assessed an amount owing equal to the first quarter payment plus interest and a late filing penalty. As with the first letter, it was not clear what period the request for funds pertained to.

Tony was so confused. He did a bit of digging and found out that, yes, new employers actually do default to quarterly remitting automatically, no application needed. But that eligibility depends on staying under a $1,000 average monthly withholding amount and keeping a clean compliance record. The only thing Tony could figure was that his late payment due to the 7-day delay must have disqualified him for quarterly remittances and bumped him to a monthly remitter. Tony thought it would have been nice if the first CRA notice had explained the issue instead of leaving him guessing.

What Went Wrong and Why It Matters

Tony made a series of administrative errors that are easy to do when it's your first time doing payroll:

He paid his first payroll remittance late, which likely disqualified him to be a quarterly remitter.
CRA's request letter did not explain why Tony was now being treated as a monthly remitter. It was not an 'educational' letter that CRA sometimes uses in other circumstances for 'first offenders'. It simply told him what he needed to do going forward.
Tony thought the problem was resolved by submitting his side of the story and the corrective action he was making going forward.
Tony was not disputing the late penalties or interest charges that resulted from the late payment. He was disputing the additional withholding amount CRA was now asking him to pay.
By the time Tony understood what was happening, the second-quarter payroll had already been queued for processing under the old remittance schedule. The problem therefore affected both quarters, not just the first.

That’s where this article starts. Steps 1-4 below will show what Tony did to address the issue, as Alex had warned him that ignoring CRA's requests for information or payment would only make his problems worse.

New In 2026: CRA's Notice of Non-Compliance Penalties

CRA can now issue a Notice of Non-Compliance with penalties of $50 per day, up to $25,000 if requested information is not provided. Responding promptly to CRA requests for information matters more now than it ever has.

Step 1: Understand why you have to pay the whole amount, not just the penalties and interest

You cannot selectively choose to pay only the penalties and interest on a CRA payroll account, excluding the disputed amount itself. The online portal does not offer a payment option other than full payment (though you can make payment arrangements if the amount is large).

If you try to send a payment equal to just the penalty and interest amount, the CRA will likely redirect that money to your disputed payroll tax balance instead, leaving penalties and interest unpaid and still accruing daily interest. This is because payroll withholdings aren't treated as ordinary business funds.¹

Tony was sure he had paid all his compliance withholdings and taxes in full. So he sat down and created a spreadsheet to breakout the quarterly information into months. He had to sort through a few payroll reports in his accounting platform because once a quarter is filed and paid, it does not allow you to view the reporting by month.

Once he confirmed he had indeed remitted the correct amount, he realized the problem wasn't going to go away until he did two things: (1) paid his late penalty and interest charges; and (2) corrected the payments to the right payroll period using the portal's transfer a misallocated payment.

The transfer requests between payroll periods went well but he ran into a snag when he tried to pay just the late penalty and interest charges. The CRA portal would only allow him to remit the whole amount they were requesting. That didn't seem fair to him

He got on Google and discovered there was a way to make a payment under protest.

Step 2: Pay the full amount "under protest"

CRA doesn't have a formal “pay under protest” payment mechanism. The most financially sound strategy is to pay the entire balance (disputed amount, penalties, and interest) while simultaneously filing a formal dispute.

Why it works: paying stops the daily compounding interest clock when the amount is paid.
The outcome: if you win your dispute, the CRA refunds the disputed amount back to you. In many cases this includes interest on the amount they held, though you should confirm this applies to your specific situation.

When Tony signed into his My Business account, he could not find an option to 'pay under protest'. But he found out how to do the equivalent.

Step 3: Pay in full

If you can pay the full disputed amount in one payment, do this before filing your dispute (see Step 4). Sign in to CRA My Business Account, select "Proceed to pay", and complete the payment.

If you can't pay the full amount in one payment, you can arrange to pay it over time instead:

Sign in to CRA My Account or My Business Account.
Select "Proceed to pay”.
Choose "Schedule a payment" or "Schedule a series of payments”.
Enter your banking information and choose your custom payment dates and amounts.
Review the agreement details and submit.
Save or print the confirmation page, and check your portal for the confirmation letter.

You can still call CRA Business Enquiries (1-800-959-5525) to arrange this by phone, but it's I find it's easier to do this online.

Before Tony registered his dispute, he signed into his My Business Account, located his amount owing and clicked on the 'Proceed to pay' button. That brought him to the My Payment portal where he set up a scheduled payment to be taken from his business account in 7 days. He had the option to pay with his debit card but he prefers scheduling a payment. He made sure to download his PAD (pre-authorized debit) agreement confirmation so he could prove he had arranged payment.

Just doing this step made him feel better because now the penalties and interest would stop accruing.

Step 4: File your formal dispute immediately

Because payroll deductions (CPP, EI, and income tax withheld) are treated as funds held in trust, the CRA pursues these aggressively, so don't delay this step.

Log into CRA My Business Account.
Select "Register a formal dispute (Appeal)”.
Enter your Business Number, selecting the RP program identifier for payroll.
Use your Notice of Assessment (PD7D) as your reference document for the dispute.
You have 90 days from the date on your notice of assessment to file.

Once you submit, you'll be issued a case number. From there, you can go to Submit Documents to upload anything that helps the reviewer avoid hunting for information: your Notice of Assessment, supporting payroll records, any reconciliation showing your numbers are correct, and copies of your protest payment and dispute submission. Keep it relevant, skip anything extraneous.

Should I upload extra documents to be safe?
No. Never, and I mean never, provide an auditor or reviewer with more information or documents than they've actually requested. Extra documents can raise new questions or invite scrutiny into areas that weren't part of your original dispute. Just provide the documents that support your case and no more. If you are working with your accountant, s/he will know what is required.

Once Tony was ready, he registered his formal dispute through the online portal, following the steps above. Once he submitted it, he received his case number. He downloaded the 'File a formal dispute - confirmation' which contained the case number for his records. He will have to quote that case number in all correspondence from here on.

Now, with his case number in hand, he went to Submit Documents. He couldn't do this step before filing his dispute because the Submit Documents process requires a case number. He uploaded his NOA letter, a copy of his payroll reconciliation spreadsheet, his PAD agreement confirmation, as well as his Dispute confirmation. Once submitted, he downloaded the Submit Documents - confirmation. Then he took a moment to exhale.

Frequently Asked Questions

What does paying CRA under protest mean?

It means paying the CRA the amount they say you owe while formally disputing the debt. This stops interest and penalties from continuing to grow while your dispute is reviewed.

🦆 For payroll assessments, don't assume that filing an appeal pauses collection. Payroll source deductions are one of the situations where CRA can continue collection action while the dispute is being reviewed. Paying the assessed amount is a strategic choice that can stop interest from accumulating on the amount you've paid and can stop collection action.

How do I register my dispute and payment under protest?

CRA doesn't have a button labeled 'pay under protest'. You achieve this status by making a standard online payment while simultaneously filing a formal dispute through My Business Account.

How does paying while disputing protect you?

It stops daily compounding interest from accumulating. If CRA rules in your favour, the disputed amount is refunded plus applicable refund interest for the time they held your money.

I don't have a decision or notice reference number. What do I do?

Your assessment letter is what you need. You don't need a separate pre-existing decision number. Use the date on your Notice of Assessment and the relevant tax year as your reference. Once you submit your dispute, you'll be issued a case number.

How long does it take for a case to be reviewed?

CRA doesn't publish a processing time specifically for payroll appeals. As a reference point, CRA's own published figures for income tax objections range from about 4 months for low-complexity cases to as long as 2 years for high-complexity ones.²

Step 5: Consider Taxpayer Relief (optional)

Separately from your dispute, you can request that CRA waive or cancel penalties and interest through the Taxpayer Relief Provisions. This step is optional and independent of your dispute.

Don't confuse a taxpayer relief request with a taxpayer dispute submission. They are 2 separate processes. If you are disputing the CRA assessment, filing a taxpayer relief request will not achieve that objective.

Tony decided not to file for taxpayer relief.

Step 6: Wait for assignment to an appeals officer

Your file is routed to the CRA Appeals Division, which operates independently from the audit or collections departments.
CRA doesn't publish a specific timeline for payroll appeals, but based on CRA's published income tax objection processing times as a general reference point, expect low-complexity issues to take roughly 4-6 months, and more complex cases to take as long as 2 years.²
You can monitor progress using the Progress Tracker link on your CRA My Business Account homepage.
Check your CRA Mail portal for alerts, and keep records of your payment receipt number, case number, and any document submission confirmation numbers.

🦆 One caveat: filing a formal dispute is free. But if your situation goes beyond a simple math or clerical error, especially where the tax liability involved is significant, consider consulting an accountant or tax lawyer.

Tony is currently watching the Progress Tracker in his My Business Account and waiting to hear from the Appeals Division. As of this writing, his case is still open.

New in 2026: CRA Mail Delivery

Digital Notices - Your Portal Is Now The Official Mailbox

CRA defaults all notices to your My Account or My Business Account portal. An email to the address on file alerts you that something is waiting. CRA considers a notice delivered the day it appears in your mail portal ... whether you’ve opened it or not. Your response deadline starts ticking immediately.

🦆 What to do now? Check your My Account or My Business Account regularly. Better yet, calendarize a check monthly. Make sure your email address on file with CRA is current.
🦆 The takeaway? You don't get to say “I didn't read it” as a reason for missing the deadline.

Sources

¹ The CRA and Canadian tax legislation treat payroll withholdings as a deemed trust under Subsection 227(4) of the Income Tax Act, with equivalent provisions in the Canada Pension Plan (Section 23) and the Employment Insurance Act (Section 86).

² Kris Gurprasad, "CRA Objection Complexity Levels and Processing Times," Taxpayer Law, restating CRA's published processing time data for income tax objections.

This article also draws on general guidance published across multiple CRA website pages regarding payroll accounts, notices of assessment, and formal disputes, too numerous to list individually.