If you run a Payroll or get paid in Canadian, this guide is for you!
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) 2020 Year-End for your Canadian Payroll and a great start heading into 2021.
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 2020.
Here are a few best practice checklists to help you have your best Payroll Year-End yet.
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
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.
Get all the 2021 Canadian Payroll deduction tables and information you need from our quick reference guide.
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.
*Only for Employers who have qualifying short term disability plans. Reductions in place for the 2021 tax year.
*Only for Employers who have qualifying short term disability plans for employees in Québec. Reductions in place for the 2021 tax year.
*If the employee's taxable income from all sources for the year will be $151,978 or less. Employees with an income greater than $151,978 can complete TD1-WS Worksheet to calculate their partial claim.
*If the employee's taxable income from all sources for the year will be $25,000 or less. Employees in Nova Scotia with an income greater than $25,000 can complete TD1NS-WS Worksheet to calculate their partial claim.
**If the employee's taxable income from all sources for the year will be $151,978 or less. Employees in Yukon with an income greater than $151,978 can complete TD1YT-WS Worksheet to calculate their partial claim.
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.
Thanks to our friends at the Canadian Payroll Association (become a CPA member here) for making this list available.
Failure to report fees for services paid to independent contractors on the prescribed T4A tax slip.
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.
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.
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.
Includes unreported salary and wages such as bonuses, commissions and cash payments to employees that must be included on a T4 tax slip.
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.
Individuals operating as self-employed contractors when they should be treated as employees or vice versa.
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.
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 2021 calendar includes all the National, Provincial, and Baking Holidays. Print it and post it by your desk for quick reference.
Our interactive and downloadable 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.
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.
Sometimes internal communications get missed. If your employees don’t receive or see your communications regarding 2020 tax slip information or what they can expect from their first pay of 2021, we’ve put together a comprehensive FAQ of the most common questions we find employees will ask their Payroll team on the matter.
If you have received more than one T4 from us, there are a few possible reasons:
If any of these apply, and you received the two slips together, it is important that you include them both in your tax return.
Box 40 on your T4 is the amount of Taxable Benefits that you have received in the year. These are benefits paid by the company on your behalf, such as 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.
Box 14 includes your gross salary as well as all taxable benefits in box 40. The amount shown in box 40 should be added to your gross year-to-date salary from your final pay statement in December. The total should equal the amount shown in box 14. If this is not the case, please contact your Payroll team.
2020 may have included an extra pay period if you are paid bi-weekly or weekly, so the amount in box 14 may be slightly higher than you expected.
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.
The Canada Revenue Agency requires that different tax slips report specific types of income.
Although many T4s are delivered digitally, you can print as many copies of your tax slips from your Employer’s Self-Service Portal, if one is available to you. Otherwise, please contact your Payroll team and request another copy.
If you are filing your taxes electronically, printing the slip is entirely optional as you will always have access to the slips through your Employer’s Self-Service Portal (as long as you have access to that portal at a future date should you need them now or in the future). If you file electronically, you can read the values for each tax slip box online when completing your income tax return.
The CRA gladly accepts self-printed tax slips printed or downloaded from a Self-Service Portal. The form generated matches all CRA specifications and will look almost identical to a printed T4 or T4A.
If your Social Insurance Number or the financial information is incorrect, please contact your Payroll team, as they may have to reissue a new tax receipt. If your address is incorrect, simply enter the correct information on your tax return.
You will need to complete and submit new TD1 forms (Provincial and Federal) for 2021, indicating the additional amount you’d like deducted. You can access the new TD1s through the CRA website.
Only the tax boxes relevant to you will be completed. But if you feel there’s a box that’s missing a value, please contact your Payroll team.
Box 24 for EI insurable earnings has a maximum of $54,200, and box 26 for CPP/QPP pensionable earnings has a maximum of $58,700. If your income is higher than those amounts, box 14 will be larger than boxes 24 and 26.
If you have additional questions or concerns, please contact your Payroll team. To facilitate a response to your query, please have your tax slips, as well as your final December 2020 pay stub available.
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, contact 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.
Check your December 2020 pay statement to see if you maxed out on your CPP and EI contributions in 2020. Remember that CPP and EI restart every January.
Additionally, CPP, QPP, EI, and QPIP have increased, which means more will be taken off each paycheque. The new employee annual maximum contributions for 2021 are:
Vacation is moved into the previous year’s accrual bank. Sick time and PTO are restarted every January with new balances.
The maximum RRSP annual contribution limit for 2021 is $27,830.
The TFSA limit for 2021 is $6,000.
A new TD1 ensures that you inform us of any changes in your life that could impact your income tax calculations. This could include having a new dependent, becoming a caregiver, or recently enrolling in school. Completing a new TD1 ensures your taxes will be calculated accurately at the source, your pay.
When you complete your new Federal TD1, leave the Additional Tax to be deducted box blank, and Payroll will not deduct additional tax from your pay.
Here you’ll find provincial and federal information on payroll deductions, payroll year-end employer kits, and more.