The Payroll Superhero’s Guide to Canadian Payroll Year-End
Payroll Year-End can be successful and stress free as long as you have prepared for it throughout the year. We round up some of the most important resources you’ll need to make sure you have a smooth (and compliant) 2019 Year-End for your Canadian Payroll and a great start heading into 2020.
Who Can Use the Payroll Year-End Toolkit?
If you run a Payroll or get paid in Canadian, this guide is for you! We built this guide primarily for Canadian Payroll and Accounting professionals responsible for processing their Payroll Year-End. However, you’ll find several resources that you can share with your fellow employees and managers to make sure that they have a positive Payroll experience when the time comes for them to file their income taxes for 2019.
Here are a few best practice checklists to help you have your best Payroll Year-End yet.
Make sure you know what’s new for your first pay of 2020
- Check rates and limits for CPP /QPP contributions, EI and QPIP premiums
- Compare the TD1 forms from last year to this year for federal and provincial changes
- Note Pension Adjustment and RRSP limits
- Are there any Federal income tax changes
- Look for changes in WCB rate and maximum earning amounts and add WCB reporting dates to your calendar
- Add any legislated provincial minimum wage changes to your calendar to make sure they are updated on-time
- If you pay weekly or bi-weekly check the calendar to see if this is a year where you will have 53 or 27 pay periods and adjust your pay calendar accordingly
A great idea is to put together a one-page brief for your employees summarizing all of the new year information so they are aware and can plan for changes to their pay based on the new values. It also provides a great opportunity to remind them to complete their new TD1s and to encourage them to start their savings plan for the new year.
You can also point them to our Employee Year-End Toolkit
Advance preparation for tax slips (e.g. T4, T4A, RL-1)
- Run quarterly reconciliation reports
- Review your tax slip boxes mid-year
- Create a list of who to get what additional payroll year-end information from
(e.g. stock option information from HR by xx/xx/xxxx date)
- Note banking and stat holidays for planning purposes
- Check for employees who have moved between business numbers or provinces
- Create templates for all of your employee and contractor communications
(e.g. when tax slips will be available, how to read tax slips, who to contact with questions)
- Send your employees this tax slip guide
Vacation or other entitlement carry-over policies
If you have a maximum carry-over policy in place plan to provide reports in September to your managers of all vacation or other entitlement balances. They can then start the conversation with any employees who have excess vacation or entitlements on how they can use it or prepare to request to an exception on the amount they can carry over to the next year.
Canadian Payroll Association Year-End Checklist
2020 Canadian Payroll Source Deductions
2020 Source Deductions, Rates, and Changes for Your Payroll Year-End Reference
- CPP / QPP
- EI / QPIP
- Worker’s Compensation Rates
- Pensionable Adjustment Limits
- Federal TD1 Changes
- Provincial TD1 Changes
- Minimum Wage Info
Canada Pension Plan (CPP) & Québec Pension Plan (QPP)
Employment Insurance (EI) & Québec Parental Insurance Plan (QPIP)
EI Premium Reduction Rates
An employer providing a Short-Term Disability (STD) plan may now qualify for a lower EI premium rate than the general rate of 1.4 times the employee’s premium rate.
Reduced EI Premium Rates for 2020
*Only for Employers who have qualifying short term disability plans. Reductions in place for the 2020 tax year.
|2020 Reduced EI Premium Rates|
|Category 1||Category 2||Category 3||Category 4|
ESDC Reduced EI Premium Rates for 2020 (within Québec)
*Only for Employers who have qualifying short term disability plans for employees in Québec. Reductions in place for the 2020 tax year.
|2020 Reduced EI Premium Rates (within Québec)|
|Category 1||Category 2||Category 3||Category 4|
Worker’s Compensation Rates (WCB, WSIB, & CSST)
Pension Adjustment Limits
Federal TD1 Changes for 2020
|Federal TD1 (form)||2020||2019|
|Basic personal*||$12,298 or $13,229||$12,069|
|Pension income amount||$2,000||$2,000|
|Spouse or common-law partner amount||$12,298||$12,069|
|Amount for eligible dependent||$12,298||$12,069|
|Caregiver amount or infirm amount for dependent 18+||$7,276||$7,140|
Federal basic personal amount – For individuals whose net income for the year is less than or equal to the amount at which the 29% tax bracket begins ($150,473 for 2020), the basic personal amount will increase to $13,229 for 2020, $13,808 for 2021, $14,398 for 2022, $15,000 for 2023. The amount will be indexed after 2023. For individuals whose net income is greater than the amount at which the 29% tax bracket begins ($150,473 for 2020), the increase in the basic personal amount will gradually phase out so that the basic personal amount for individuals whose income is greater than the next tax bracket threshold ($214,368 for 2020), remains unchanged ($12,298 for 2020) and will continue to be indexed.
Provincial TD1 Changes for 2020
|Basic Personal Amount||2020||2019|
|British Columbia (form)||$10,949||$10,682|
|New Brunswick (form)||$10,459||$10,264|
|Newfoundland and Labrador (form)||$9,498||$9,414|
|Northwest Territories (form)||$15,093||$14,811|
|Nova Scotia (form)||$11,481*||$11,481*|
|Prince Edward Island (form)||$10,000||$9,160|
|Québec (EN) (FR)||$15,532||$15,269|
*If the employee’s taxable income from all sources for the year will be $25,000 or less. See the TD1NS-WS Worksheet for more information.
Nova Scotia basic personal amount – Every person employed in Nova Scotia and every pensioner residing in Nova Scotia can claim the basic personal amount. If your taxable income from all sources for the year will be $25,000 or less enter $11,481, comprising the basic amount of $8,481 and the additional amount of $3,000, and if it is more than $75,000 enter $8,481. If your taxable income will be between $25,000 and $75,000 and you want to calculate a partial claim for the $3,000 additional amount, get Form TD1NS-WS, Worksheet for the 2019 Nova Scotia Personal Tax Credits Return, and fill in the appropriate section.
Minimum Wage Info
|Jurisdiction||Hourly Rate||Effective Date|
|Newfoundland & Labrador||$11.40||4/01/2019|
|Prince Edward Island||$12.25||4/01/2019|
Top 10 Payroll Audit Adjustments from CRA
Each year, the Canada Revenue Agency provides a lit of commonly requested adjustments to an employer’s payroll as a result of wages and benefits not being correctly reported by the employer.
Top 10 Payroll Audit Adjustments from Canada Revenue Agency (2017 reporting Year)
Thanks to our friends at the Canadian Payroll Association (become a CPA member here) for making this list available.
1. Unreported Payments for Independent Contractors
Failure to report fees for services paid to independent contractors on the prescribed T4A tax slip.
2. Security/Stock Options
A common method of compensating officers and employees providing them with a financial benefit as well as a sense of ownership with the employer. Taxable benefits are not being reported when stock options are exercised.
3. Automobile Standby and Operating Expense
Employees are not maintaining proper logbooks to separate personal and business driving so employers are not calculating the benefit correctly. Incorrect perception that if a vehicle doesn’t meet the definition of an ‘automobile’ there is no benefit to be reported.
4. Housing, Low/Free Rent, Board & Lodging
With the exception of special or remote worksites, most employees that receive free or subsidized housing from their employer would be deemed to receive a taxable benefit based on fair market value (FMV). In some instances, the value of the benefit may be reduced.
5. Unreported Payments
Includes unreported salary and wages such as bonuses, commissions and cash payments to employees that must be included on a T4 tax slip.
6. Travel Expenses and Allowances
In order to be treated as non-taxable, travel expenses and allowances must be reasonable and clearly validated as business expenses that primarily benefit the organization.
7. Reclassification of Employee Status
Individuals operating as self-employed contractors when they should be treated as employees or vice versa.
8. Personal and living expenses (employees or shareholders)
Many corporate owners look at this type of expense as personal drawings and are therefore not reporting it as taxable income. These include appropriations of corporate assets for personal user. Some employees as part of their compensation agreement may have persona living expenses paid for by the employer unless these fall under a specific exemption this would be considered taxable income.
9. Vehicle Allowances
Employers are providing non-accountable vehicle allowances to their employees and not reporting the benefits as income, this ca include cash allowances, gas cards, or reimbursements.
Employers are not reporting the value of this benefit and when they do, they report a minimum amount and not the true fair market value (FMV).
This 2020 calendar includes all the National, Provincial, and Baking Holidays. Print it and post it by your desk for quick reference.
Tax Slip Guides for Canadian Payroll Year-End
Our visual tax slip guides are the most accessed resources we provide for Canadian Payroll Year-End. You’ll find a bilingual guide to T4 tax slips, a T4A tax slip guide and the Relevé RL-1 tax slip guide (English only) for employees in Québec.
What you need to know about the Canadian Pension Plan (CPP) enhancements
The CPP will be enhanced gradually over a 5-year period from 2019-2023, allowing employees and employers to adjust to the change.
Contribution rates increase by 0.15% in 2020, 0.20% in 2021, and 0.25% in 2022 and 2023. As a result, by 2023 each employee and employer will be contributing 5.95% annually, for a combined total of 11.9%. See the chart below for a breakdown of the contribution rates from 2019-2023:
|Year||Increase Rate||Employee contribution rate||Employer contribution rate|
|2023 (and after)||1.00%||5.95%||5.95%|
The above contribution rates apply to all pensionable earnings that are above the Year’s Basic Exemption (YBE) of $3,500, and below the Year’s Maximum Pensionable Earnings (YMPE), of $57,400 for 2019. These earnings from 2019 forward are known as the “first additional pensionable earnings”.
The second pensionable earnings begins in 2024. This is when the Yearly Additional Maximum Pensionable Earnings (YAMPE) will be phased over two years beginning in 2024. The YAMPE is the amount that CPP contributions will be increased by, which is done in two steps. See the chart below for a yearly breakdown of these steps in 2024 and 2025:
|Year||% Increase Rate*||$ Increase Rate*|
Although the actual numbers will depend on the YMPE’s for 2024 and 2025, the numbers above are based on the 2019 YMPE of $57,400.
What changes will I need to make to my Payroll software?
For the first five years, there will be no change to how the CPP is calculated, except the maximum pensionable earnings and the contribution rate for both employees and employers will be raised each year. As a result, your payroll software will only require an update to the contribution percent rate until at least 2023.
How will this impact companies and employees?
By raising the cost of CPP contributions, it increases the “average lifetime earnings” from 25% to 33.33%. Additionally, it is 50% more than what the current maximum retirement pension is. Although this increase will take a few years to fully transition, changes began in 2019.
As for the YAMPE, these earnings will be taken into account as part of the second additional pensionable earnings. The total contribution rate for earnings between YMPE and YAMPE will be 8.0%, which means that the burden will be split as 4.0% for employees and 4.0% for employers.
Below is a table demonstrating the maximum amount of increase in dollar value:
|Year of Earnings Maximum||Amount of Weekly Increase|
|2024 (and after)||$14.98|
But what will this look like for your employees?
Take Scott for example. He makes $41,350 annually, and his current contributions are $72.06 are biweekly, per pay period. Due to the CPP enhancements, Scott’s contributions will increase by $2.18 per pay period in 2019, and in 2023 he will contribute an additional $14.56 per pay period. As a result, Scott will contribute $74.24 in 2019, and increase to $86.62 in 2023.
As Scott’s earnings are below the YMPE, he will not be affected by the second additional pensionable earnings contributions in 2024 and 2025.
What will the long-term benefits be?
By having a higher CPP contribution rate, it enables higher retirement benefits for making higher contributions. Your pension will increase based on how much and for how you contribute to the enhanced CPP. Other benefits include:
• Improved death benefits
• Expanded disability provisions
• Earnings drop-in for parents of young children and for disabled CPP contributors
For more information:
Employee Communications for Canadian Payroll Year-End and First Pay Period
Happy New Year! Now you’re in full swing of getting those T4s issued before the end of February, but your inbox and voicemail are starting to pile up with questions from employees. Questions like, ‘What does Box 40 mean on my T4?’ or ‘ When do I get my T4?’. No worries, use the communications templates below to help educate employees on what they can expect regarding Payroll Year-End.
Frequently Asked Questions from Employees for 2019 Year-End
Sometimes internal communications get missed. If your employees don’t receive or see your communications regarding 2019 tax slip information or what they can expect from their first pay of 2020, we’ve put together a comprehensive FAQ of the most common questions we find employees will ask their Payroll team on the matter.
Employee Tax Slip FAQ for Payroll Year-End
1. Why do I have two T4 Slips?
If you have received more than one T4 from us there are a few possible reasons:
- You worked at different locations and/or different divisions of the company which required us to produce a T4 for each business number you worked in
- You worked or earned income in different ways, for example you were on contract for a period of time and then gained full-time employment with us
- You worked for the company in two different provinces during the year
If any of these apply, and you received the 2 slips together, it is important that you include them both in your tax return.
2. What is box 40 on my T4?
Box 40 on your T4 is the amount of Taxable Benefits that you have received in the year. Taxable Benefits are those benefits that have been paid by the company on your behalf. Examples of Taxable Benefits include Life Insurance and company RRSP contributions. Taxable Benefits are identified as such on your pay statements. If you total the items identified as Taxable Benefits on your pay statements you should arrive at the total in Box 40. If your total is not the same as Box 40 please contact your Payroll team.
3. Why does my income in box 14 on my T4 seem high?
You may have received two or more T4s. The amount shown in Box 14 in each T4 should be totaled and equal to your final December pay statement year-to-date earnings, plus the total of taxable benefits recorded in Box 40 of each T4. If this is not the case please contact your Payroll team.
4. Why does my income in box 14 on my T4 seem low?
Box 14 includes your gross salary as well as all applicable taxable benefits that are shown in Box 40.The amount shown in Box 40 should be added to your gross year-to-date salary from your final December pay statement. The total should equal the amount shown in Box 14. If this is not the case, please contact your Payroll team.
AND … if your company had an extra pay period this year you can also include this explanation:
This year because we are on a bi-weekly or weekly frequency, our organization had an extra pay period so the amount in Box 14 may be slightly higher than you expected.
5. What is the difference between a T4 and a T4A?
The Canada Revenue Agency requires that different tax slips be used to report specific types of income.
- A T4 is a tax slip issued to report employment income, taxable benefits and retiring allowances.
- A T4A is a tax slip for income such as pension, lump sum payments, and other income as defined by the CRA.
6. How can I get a reprint of my tax slip if I lose it?
*This answer will vary based on how tax slips are delivered to employees
You can print as many copies of your T4/T4A from your employee self-service if you opted in to receive your tax slip electronically. If you have not opted in to self-service please contact your Payroll team, we can provide you with a copy of your T4 and help you get registered for self-service.
7. Do I need to print my online tax slips?
*This answer will vary based on how tax slips are delivered to employees
If you are filing your taxes electronically, printing the slip is entirely optional as you will always have access to the slips through your employee self-service portal should you need them now or in the future. If you file electronically, you can read the values for each of the tax slip boxes online as you are completing your income tax return.
8. Will Canada Revenue Agency (CRA) accept a self-printed/online tax slip?
*This answer will vary based on how tax slips are delivered to employees
The CRA gladly accepts self-printed tax slips from our employee self-service portal. The form generated matches all specifications from CRA and will look almost identical to a printed T4 or T4A.
9. What if there is incorrect information on my T4/T4A?
If your Social Insurance Number is incorrect, or if the financial information on you believe your tax receipt is incorrect, please contact your payroll team, as we may have to reissue a new tax receipt. If your address is incorrect, simply enter the correct information on your tax return.
10. How do I arrange to make changes to my tax claim amounts or have additional taxes deducted from my pay in 2020?
You will need to complete and submit new TD1 forms (Provincial and Federal) for 2020 indicating the changes or additional amount to be deducted.
The TD1 forms can be accessed through your Employee Self-Service or at the CRA website.
11. Why are over half of my tax slip boxes empty?
Only the tax boxes relevant to you will be completed. But if you feel there is a box that should have a value in it please contact your Payroll team.
12. Why is my income in Box 14 greater than the CPP pensionable / EI insurable earnings?
(i.e. when Box 14 shows $61,888 and Box 24 is $53,100 and Box 26 is $57,400)
Box 24 EI insurable earnings has a maximum of $53,100 (2019) and Box 26 CPP/QPP pensionable earnings has a maximum of $57,400 (2018).
If your income is higher than those amounts it is because you reached the maximums.
13. Who should I contact if I have a question?
If you have additional questions or concerns, please contact your Payroll service team.
(you can include a phone number or email address here)
To facilitate a response to your query, please have your T4 and/or T4A, as well as your final December 2019 pay stub available.
14. I need help filing my tax return.
The Canada Revenue Agency can help you if you’re having a tough time filing your income tax return.
If you are a student, senior, person with a disability, a newcomer to Canada, or a low-income earner with a simple tax-filing situation, you can contact the Community Volunteer Income Tax Program (CVITP) at: 1-800-959-8281 to ask for help. CVITP volunteers work with members of local community organizations who can help you complete and file your return. Click here for more information on the Community Volunteer Income Tax Program.
Frequently Asked Questions from Employees 2020 First Pay Period
1a.Why is my pay cheque less in January than it was in December?
Check your December 2019 pay statement to see if you maxed out on your CPP and EI contributions in 2019. Remember that CPP and EI restart every January.
1b.Why is my pay cheque less in January than it was in December?
The new employee annual maximum contributions for 2020 are:
- CPP: $2,898.00
- QPP: $3,146.40
- EI: $856.36
- Québec EI: $650.40
- QPIP: $387.79
2. Why is my vacation / sick / PTO balance reset to zero?
Vacation is moved into a previous year accrual bank. Sick and / or PTO are restarted every January with new balances.
3. I would like to contribute to my RRSP in the first 60 days of the new year, what is the RRSP annual contribution limit for 2018?
The RRSP annual contribution limit for 2019 is $26,500.
4. How much am I allowed to put into my TFSA for 2020?
The TFSA limit for 2020 is $6,000.
5. Will the minimum wage be changing in 2019, and if so, when and by how much?
6. Why do I need to complete new TD1s each year?
A new TD1 ensures that you inform us of any changes in your life that impact your income tax calculations (such as you have a new dependent, have recently become a caregiver or have enrolled in school).
By completing a new TD1 you are providing information that will make sure your taxes will be calculated accurately at the source.
7. I don’t want additional tax to come off my cheque this year, how can I prevent that?
When you complete your new Federal TD1 leave the “Additional Tax to be deducted” box blank and we will no longer deduct additional tax from your pay.
A Guide to T2200 Forms
Get all the T2200 form information you need for payroll year-end.
T2200s can be shared with employees as a PDF which can be printed and completed manually or as a fillable / savable PDF, which can be completed electronically.
Here is the link to both versions.
Canada Revenue Agency’s eligible employment expenses guide can be found here.
For employees in Québec, the T2200 equivalent form is called TP-64.3-V, General Employment Conditions. It is also available in PDF and fillable PDF formats.
Here is the link to both versions.
Revenu Québec’s eligible employment expenses guide can be found here.
Additional Resources on T2200s
- The HR Insider has put together a guide for employees to help them determine if they qualify for a T2200.
- This week, the Canadian Payroll Association is offering a webinar on the topic, for more information or to register, click here.
Helping your employees determine their T2200 eligibility and making sure they are aware that their forms may not be accepted by CRA, are important steps in maintaining good relationships with your employees.
Canadian Payroll Legislative Updates and Links
Here you’ll find provincial and federal information on payroll deductions, payroll year-end employer kits, and more.