Year end payroll checklist

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There are a number of tasks to consider when wrapping up your business activities at year-end.

Here are some key areas to check:

  • Complete all balancing including statutory deductions
  • Ensure CPP/QPP, EI, and QPIP deductions and reporting is accurate
  • Ensure all employment earnings and deductions are reported on T4 (see below)
    • Box 14 Employment Income- Box 14 includes salary, wages, bonuses, executor's and administrator's fees, vacation pay, honoraria, gratuities, director's fees, commissions, the value of taxable benefits (including GST/HST), taxable allowances and any other payments made directly to the employee during the year.
    • Box 16 Employee's CPP- This box contains the employee's total remuneration for CPP for the year. This box should be blank if the employee did not contribute to the plan. This total must not exceed the year's maximum contribution. If an employee made contributions to both CPP and QPP, you must complete two T4 slips – one showing the income the employee earned in Québec and the QPP deducted, and the other showing the income earned and CPP deducted in the other jurisdiction.
    • Box 17 Employee's QPP – This box contains the amount contributed by the employee to the QPP and must not exceed the yearly maximum contribution. If the employee made no contributions to QPP this box should be left blank.
    • Box 18 Employee's EI Premium – This box contains the amount deducted from the employee's earnings for EI Premiums. This box should remain blank if there were no deductions for the year. EI premiums paid by the employer should not be reported on the T4.
    • Box 20 RPP Contributions - This box contains the total amount the employee contributed to the registered company pension plan, up to the applicable maximum. This field should remain blank if the employee did not contribute to the plan. The company pension plan must be registered with CCRA/Revenu Québec and have a registration number (of which is reported in box (50) of the T4).
    • Box 22 Income Tax Deducted- This box contains the employee's total federal, provincial (except Québec), and territorial income tax deducted for the year. This box should remain blank if no tax was deducted. Do not include amounts deducted under a garnishee or requirement to pay order for previously assessed tax arrears.
    • Box 24 EI Insurable Earnings – This box contains the total amount of income for which EI premiums were deducted. This box should remain blank if a) there are no insurable earnings, b) if this box is the same as the amount reported in box (14) or c) if the insurable earnings are over the maximum for the year. This total multiplied by the EI rate for the taxation year should equal the total premium amount reported in box (18).
    • Box 26 CPP/QPP Pensionable Earnings – In most cases this box should remain blank. An amount must be shown in this box if an employee's pensionable earnings are greater than the employee's income as reported in box (14).
    • Box 40 Other Taxable Benefits - This box contains the value of the taxable benefits (including GST/HST) and taxable allowances made to the employee by the employer during the year (including any portion of premiums paid for Group Life and any portion of premiums for Health and Dental in Quebec).
    • Box 44 Union – This box contains amounts deducted from the employee for union dues. This could be for annual membership dues to a trade union or an association of the public servants or for dues to a parity or an advisory committee (or similar body) as required by provincial law.
    • Box 46 Charitable – This box contains the amounts deducted from employees for donations to registered charities in Canada.
    • Box 52 Pension Adjustment – This box contains the dollar amount of benefits accrued in a year under a registered pension plan or a deferred profit-sharing plan.
    • Box 50 RPP/DPSR Registration# – This box contains the employee's registration number for his/her registered pension plan or a deferred profit-sharing plan.
  • Ensure all employment earnings and deductions are reported on T4A (see below)
    • Box 16 Pension or Superannuation – This box contains the taxable portion of annuity payments made to an employee or retiree from a superannuation or pension plan fund. Also reported in this box are benefits paid periodically from the plan to an employee for services the individual performed while the employee did not reside in the country. If benefits were paid from an unregistered plan or fund an entry should be made to the Footnotes field indicating the box number and dollar amount. In such a case, Code 09 should be entered in the Footnote Code field.
    • Box 18 Lump Sum Payments – This box contains the taxable portion of single payments from a pension plan or fund or DPSP due to the employee (or former employee) withdrawing from the plan, retiring, or dying. This amount should also include the taxable part of single payments from a pension plan or fund due to changes to the plan, including termination of the plan or fund.
    • Box 20 Self-Employed Commissions – This box contains the total commissions paid to an independent agent.
    • Box 22 Income Tax Deducted- This box contains the employee's total federal, provincial (except Québec), and territorial income tax deducted for the year. This box should be left blank if no tax was deducted. Amounts deducted under a garnishee or requirement to pay order for previously assessed tax arrears should not be included.
    • Box 24 Annuities – This field contains the total annuity payments made under an income averaging annuity contract (IAAC). Also reported in this field is the yearly taxable portion of other annuity payments.
    • Box 26 Eligible Retiring Allowance – This field contains the total amount of retiring allowances paid that were deemed eligible for tax-free transfer to an RPP or RSPP.
    • Box 27 Non-eligible Retiring Allowance – This box contains the total amount of retiring allowances that were deemed non-eligible for tax-free transfer to an RPP or RRSP.
    • Box 28 Other Income – This field contains the aggregate amounts for the following types of payments:
      • Supplementary unemployment benefit plan payments.
      • Research grants, scholarships, fellowships, prizes, and bursaries. Depending on the type of payment, you will be required to include the appropriate footnote information.
      • Gross amount of death benefits paid. Payments under a revoked DPSP. This type requires a footnote entry.
      • Certain payments under a wage-loss replacement plan. For a listing of the types of payments to report, see the CCRA's Interpretation Bulletins IT-54 and IT-428. This type requires a footnote entry.
      • Employer contributions for retirees to a provincial health services insurance plan. This type requires a footnote entry.
      • Fees or other payments made to Canadian residents for services from which income tax was taken, and which do not have to be reported elsewhere on a T4A or other information return.
      • Employer-provided group term life insurance benefits that a former employer provided or that are reported by someone else for the employer or former employer.
      • Taxable board and lodging or transportation benefits provided by a third party (for example, a contractor) to employees of subcontractors. The third party is responsible for the benefits.
      • Benefits from loans provided to a shareholder or person related to a shareholder. This type requires a footnote entry.
      • Cash awards or prizes that a manufacturer paid directly to an employee of a dealer or other sales entity.
      • Annuity payments from an annuity an individual purchased with a premium refund from a deceased annuitant's RRSP.
      • Proceeds of disposition or deemed proceeds of disposition of an income-averaging annuity contract.
      • Payments under the Labour Adjustment Benefits Act or the Appropriation Act to compensate for the loss of office or employment.
      • Disability benefits from a superannuation or pension plan. This type requires a footnote entry.
    • Box 30 Patronage Allocations – This field contains any allocations (in cash or kind) given to individuals for their patronage. This can include: certificates of indebtedness; amounts credited towards the balance a recipient may owe the payer of the patronage; and shares of a corporation that an individual receives because of a patronage payment.
    • Box 32 Registered Pension Plan Contributions (Past Service) – This box contains the contributions that a former employee made to buy past service, including any installment interest. If there is no longer an employee-employer relationship, the plan administrator usually completes the T4A. This type requires a footnote entry.
    • Box 34 Pension Adjustment – This field contains the amount of an employee's pension adjustment under a registered plan during a period of leave or reduced service.
    • Box 36 Pension Plan Registration Number – This box contains registration number the CCRA has issued for the RPP or DPSP in which an employee participates, and which gave rise to the PA you may be reporting. You have to report the pension plan number even if your plan requires only employer contributions. If you made contributions to more than one plan for the employee, enter only the number of the plan under which the employee has the largest PA.
    • Box 40 RESP Accumulated Income Payments - This field contains RESP accumulated income payments (other than a refund of contributions or an educational assistance payment) if the employer is a promoter of a registered educational savings plan (RESP).
    • Box 42 RESP Educational Assistance Payments – This field contains RESP educational assistance payments (other than a refund of contributions) paid to or for an individual to assist him or her education at a post-secondary school level — if the employer is a promoter of an RESP.
    • Box 46 Charitable Donations - This box contains the amount deducted from the recipients' earnings for donations to registered charities in Canada.
    • Box 12 Social Insurance Number – This box contains the employee's social insurance number.
    • Box 38 Footnote – When you enter a written footnote in the Footnote codes and explanation area, you have to enter the corresponding footnote code here in box 38. If there is no written footnote, leave box 38 blank, or enter 00. If you have only one footnote code, record it in box 38. If you have more than one code, enter 13 in box 38. Also record all the relevant codes in the Footnote codes and explanationarea at the bottom of the T4A slip.
    • Box 13 Business Number – This box contains the CCRA business number for which this employee's statutory deductions will be remitted to the CCRA.
    • Box 14 Recipient's Number – Use this optional box to enter a retiree, an employee, or a payroll number.
    • Box 61 Patronage Business Number – This box contains the 15-digit BN you use to send the CCRA your recipients' deductions. This number appears in the top left corner of the statement of account that the CCRA sends to you each month.
  • Ensure all SIN numbers are valid and listed on applicable forms.
  • Distribute new federal, provincial, and territorial TD1 forms (if changes), TD1-X (commission employees), and TP-1015.3 for Québec residents
  • Complete and submit RL-1 form for Québec employees and source deductions (health, dental and AD&D premiums)
    • Box G of RL-1 must not must not be more than the maximum pensionable earnings under the QPP,if you have entered an amount in box B and an amount in any of boxes A, Q, R and U, you must enter an amount in box G of the RL-1 slip. If the result of your calculation is zero, enter "0."
  • Ensure that employees who have transferred or worked in multiple provinces have separate T4s
  • Include T4 and RL-1 slip for employees who have paid both CPP and QPP
  • Report taxable benefits for retired/former employees on T4A (if greater than $25) and RL-1 slip
  • Report any WCB top-ups on T4
  • Report employer contributions to RRSP plans in T4 box 14/40 and RL-1 A/L
  • Report WCB payments on T5007 (except Québec)
  • Calculate and report Pension Adjustments and reversals on T10 – PARs

While this is not an exhaustive list, hopefully it provides some guidance to ensure efficient year end activities.

Read more from Gordon Hart, founding partner, Selectpath below or on his blog:

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