Payroll year-end can be a heavy lift, but it doesn’t have to be. It’s all about how you prepare for it. Having the right processes in place and the correct information on hand can ensure it’s compliant and stress-free. To help you get through your Canadian payroll year-end with flying colours, we’ve rounded up all the essential year-end resources and checklists you need to successfully finish 2022 and easily process your first pay of 2023.
Who can use the payroll Year-End Toolkit?
If you run a payroll or get paid in Canada, this guide is for you. We built this guide primarily for Canadian Payroll and Accounting professionals responsible for processing their payroll year-end.
To help your employees and managers easily file their 2022 income taxes, Avanti’s Year-End Toolkit also includes many informative guides to share with your team.
2022 Canadian payroll year-end best practices
Make it your best year-end ever with our best practice checklists:
Make sure you know what’s new for your first pay of 2023
- 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
- Check if there are any Federal income tax changes
- Look for changes in WCB rates 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
Create a one-page brief for your employees summarizing all of the new year information. This way they can plan for changes to their pay based on any 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
Get a head start on 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 on providing reports in September to your managers of all vacation or other entitlement balances. This will help them 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 Year-End Checklists
2023 Canadian payroll source deductions
Get all the 2022 Canadian Payroll deduction tables and information you need from our quick reference guide.
2023 source deductions, rates, and changes for your payroll year-end reference
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.
More information on rate setting
Reduced EI premium rates for 2023
*Only for employers who have qualifying short term disability plans. Reductions in place for the 2023 tax year.
Reduced EI premium rates for 2023 (QPIP)
*Only for employers who have qualifying short-term disability plans for employees in Québec. Reductions are in place for the 2023 tax year.
Worker’s Compensation rates (WCB, WSIB, & CSST)
*For 2023, employers are to use the maximum federal basic personal amount (BPAF) of $15,000 for all employees unless the employee provides a new Form TD1. If the BPAF formula was previously implemented on your payroll system, you can continue to use it.
Provincial TD1 changes for 2023
**For 2023, employers are to use the maximum Nova Scotia basic personal amount (BPANS) of $11,481 for all employees unless the employee provides a new Form TD1. If the BPANS formula was previously implemented on your payroll system, you can continue to use it.
***For 2023, employers are to use the maximum Yukon basic personal amount (BPAYT) of $15,000 for all employees unless the employee provides a new Form TD1. If the BPAYT formula was previously implemented on your payroll system, you can continue to use it.
Minimum wage info
Common payroll audit adjustments from CRA
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 National Payroll Institute (become an NPI 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).
2023 Canadian payroll calendar
This 2023 calendar includes all the national, provincial, and banking holidays.
2023 Canadian Payroll Stat Holiday Calendar
2022 Tax slip guides for Canadian payroll year-end
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 RL-1 tax slip guide (English only) for employees in Québec.
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 2022 year-end
Sometimes internal communications get missed. If your employees don’t receive or see your communications regarding 2022 tax slip information or what they can expect from their first pay of 2023, we’ve put together a comprehensive FAQ of the most common questions employees ask their payroll team.
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 two slips together, make sure you include both slips 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. Taxable Benefits include items like 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?
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 pay statement of the year. The total should equal the amount shown in Box 14. If this is not the case, please contact your payroll team.
If your company pay frequency is bi-weekly or weekly, there is an extra pay period so the amount in Box 14 may be slightly higher than you expected.
4. Why does my income in box 14 on my T4 seem low?
You may have received two or more T4s. The amount shown in Box 14 in each T4 should be totalled 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.
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.
6. How can I get a reprint of my tax slip if I lose it?
If your company uses the Avanti Self-Service Portal, you can print as many copies of your T4/T4A from your employee account as required (if you opted in to receive your tax slip electronically).
If you do not have the self-service option by the last day of February, please contact your payroll team who can provide you with a copy of your T4.
Employees can also obtain T4s/T4As online directly from Canada Revenue Agency.
7. Do I need to print my online tax slips?
If you are filing your taxes electronically, printing the slip is entirely optional. As an employee, 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 the Canada Revenue Agency (CRA) accept a self-printed/online tax slip?
T4/T4A/NR4 forms are submitted to the CRA by the employer on behalf of the employee.
In the case of a personal audit, the CRA accepts self-printed tax slips from the Employee Self-Service Portal. The form generated matches all specifications from CRA and will look 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 you believe the financial information on your tax receipt is incorrect, please contact your payroll team for them to review. If there is an issue, a new tax receipt may need to be issued. 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 2023?
You will need to complete and submit new TD1 Forms (Provincial and Federal) for 2023 indicating the changes or additional amount to be deducted.
Check with your payroll administrator for the TD1 forms or visit 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 and EI insurable earnings?
Box 14 is the sum of all income you received which was subject to income tax. There is no limit on the amount of income subject to tax deductions.
13. Who should I contact if I have a question?
If you have additional questions or concerns, please contact your payroll team.
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, 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.
Frequently Asked Questions from employees 2022 first pay period
1. Why is my paycheque less in January than it was in December?
Check your December 2022 pay statement to see if you maxed out on your CPP and EI contributions in 2022. 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 2023 are:
- CPP: $3,754.45
- QPP: $4,038.40
- EI: $1,002.45
- Québec EI: $781.05
- QPIP: $449.54
2. Why is my vacation, sick, PTO balance reset to zero?
Vacation is moved into the previous year’s accrual bank. Sick time and PTO are restarted every January with new balances.
3. I want to contribute to my RRSP in the first 60 days of the new year; what is the RRSP annual contribution limit for 2022?
The maximum RRSP annual contribution limit for 2022 is $29,210
4. How much am I allowed to put into my TFSA during 2023?
The TFSA limit for 2023 is $6,500.
5. Will the minimum wage be changing in 2023, and if so, when and by how much?
Check out this guide to minimum wages and planned increases across Canada.
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 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.
7. How do I prevent the additional tax from coming off my cheque this year?
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.
Additional payroll legislative updates and links
Here you’ll find provincial and federal information on payroll deductions, payroll year-end employer kits, and more.
Editor's Note: This blog post was updated in December 2022 for accuracy and comprehensiveness.