For most people a new year signals a fresh start and a time to make resolutions. A new calendar year is also the start of a new payroll year for employers, and time to close the prior year’s payroll records and issue T4 slips.
Payroll always runs on a calendar year, even if a business’s fiscal year ends in a different month. For example, a business might have a fiscal year-end of July 31, but T4 slips are still prepared based on the January – December calendar year.
T4 slips must be submitted to Canada Revenue Agency and distributed to the employees by the last day of February. This year is a leap year, so slips for 2015 payroll are due by Monday, February 29th 2016.
You do not need to wait until the end of February to start preparing your T4 slips. In fact, it’s better to start working on them ASAP! If your bookkeeper or accountant prepares your slips for you, they will definitely appreciate receiving your records early instead of at the last minute. If you are preparing your slips yourself, starting early gives you time to collect any missing information and resolve any problems you may find.
Whether you are preparing the T4 slips yourself, or giving your records to your accountant or bookkeeper to prepare the slips for you, here are some points to remember.
Tax Accounting Tips for Preparing Your T4 Slips
- Do you have complete and current information for all employees (including any who left your company during the year)? Current mailing address, correct Social Insurance Number, date of birth, etc.?
- Have you recorded all the 2015 paycheques in your bookkeeping records? Remember that the amounts reported on the T4 slips are based on all paycheques dated in 2015, even if those cheques include time worked in a different year. For example, a paycheque issued in early January 2015 may include hours worked in December 2014 – since the cheque is dated in 2015, all the earnings on the cheque are included on the 2015 T4 slip. Make sure your records are complete and up to date before working on your slips, or handing your records off to your bookkeeper or accountant.
- Do you offer any taxable benefits to your employees that should be included on the T4 slips? Taxable benefits can include things like life insurance paid by the employer, a company car that the employee can also use for personal driving, a flat-rate monthly allowance for using their personal vehicle, etc. These benefits are considered part of the employees’ taxable compensation and must be reported on the T4 slip. You can find more information about taxable benefits on the CRA website: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/menu-eng.html
- For some taxable benefits, the employer is considered to have collected HST on the value of the benefits, and the employer must include that HST collected on their next HST return. Again, the CRA website has more details: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/gst-tps/menu-eng.html
- Do your deductions match your remittances? The total of the CPP (employer and employee portions), EI (employer and employee portions) and Tax on your T4 summary should equal the amount remitted to CRA for the year. You can check your 2015 remittance total through CRA online, by phone, or on your remittance form (be sure the balance includes all the remittances for the year, including the December 2015 remittance due in January). It’s always recommended that you check your remittance total with CRA to confirm that all your payments during the year were applied correctly, and in case any credits or adjustments were made to your payroll account.
- Did you deduct the right amounts? Confirm that CPP and EI were deducted at the correct rate, and that you didn’t exceed the CPP and EI 2015 maximums. This page on the CRA website has links to more information about CPP and EI rates and maximums: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/clcltng/menu-eng.html
- Do you have any employees who did not have CPP or EI deducted from their pay? Be sure those employees qualify for the exemption from CPP and EI deductions. This Employer’s Guide can help you confirm if an employee should be exempt from CPP or EI: http://www.cra-arc.gc.ca/E/pub/tg/t4001/t4001-e.html
Errors on T4 slips can result in penalties, and CRA may request more detailed payroll reports after receiving your T4 slips to explain any discrepancies.
If you have any questions about payroll, CPP and EI deductions, taxable benefits, or preparing T4 slips, please contact RLB’s bookkeeping team. We are payroll experts and prepare T4 slips for hundreds of employers. We can answer your questions, help you find and fix any payroll errors, or prepare your T4 slips for you.