Preparing payroll for the busy tax season

Carswell’s payroll consulting team provides a list for payroll practitioners to accurately complete 2013 taxes
By Carswell’s payroll consulting team
|Canadian Payroll Reporter|Last Updated: 12/09/2013

The deadline for filing T4, T4A and T4A-NR information slips and summary reports is Feb. 28, 2014. To make the process easier, the following checklist has been prepared to assist payroll practitioners with preparations for reporting 2013 income tax.

Before submitting T4s and T4As, ensure the following items have been checked:

• No employee has contributed more than the 2013 Canada Pension Plan (CPP) maximum of $2,356.20.

• No employee has contributed more than $891.12 in employment insurance (EI) premiums, which is the 2013 EI maximum for employees in all parts of Canada, except Quebec. The maximum EI premium for Quebec employees is $720.48.

• Manual cheques have been included and cancelled cheques have been excluded from all year-to-date earnings totals and deductions totals that are reported on the T4 and T4A slips.

• All taxable benefits need to be included as employment income and ensure the corresponding source deduction totals have been updated. The latter is especially important for individuals below the yearly pensionable (CPP) earnings.

• Group term life insurance taxable benefits for current employees are reported using code 40 in the "Other Information" area of the T4. For retired employees, report the benefit on a T4A in the "Other Information" area, using code 119 even if the total amount of all benefits paid in the calendar year is $500 or less. Multi-employer plan administrators or trustees that provide taxable benefits from group term life insurance to former employees or employees of such a plan are required to prepare a T4A slip only if the benefit is more than $25.

• Box 24 (EI insurable earnings) on the T4 has been completed. In the box, report the total amount used to calculate the employee’s EI premiums, up to the annual maximum insurable earnings ($47,400 for 2013). If the employee had no insurable earnings or was exempt from EI, enter "0" in the box.

• Box 26 (CPP/Quebec Pension Plan (QPP) pensionable earnings) on the T4 slip has been completed. In the box, report the employee’s pensionable earnings for the year, up to the annual maximum pensionable earnings ($51,100 for 2013). If the employee had no pensionable earnings or was exempt from CPP/QPP, enter "0" in the box.

• Two T4 slips must be prepared for employees who made contributions to both the CPP and QPP: one showing the QPP deducted and the applicable pensionable earnings and remuneration the employee earned in Quebec, and the other showing the CPP deducted and the applicable pensionable earnings and remuneration the employee earned in any other jurisdiction.

• The CPP contribution or EI premium amounts reported on the T4 can not been adjusted if you over-deducted employee contributions. The Canada Revenue Agency (CRA) will credit the employee with the over-contribution when a personal income tax return is filed. To apply for a refund for a CPP and/or EI overpayment, complete form PD24, Application for a Refund of Overdeducted CPP Contributions or EI Premiums. Send it in with your T4s if filing on paper. If it is being filed electronically, the form will need to be sent in separately by mail.

• Ensure all retiring allowances paid to terminated employees have been reported on a T4. Employers are required to enter the amount of a retiring allowance eligible for tax-free transfer to an RPP or RRSP in the "Other Information" area of the T4, using code 66 and the amount that is not eligible for transfer using code 67. For Aboriginal employees, report an eligible retiring allowance in the "Other Information" area, using code 68 and the non-eligible portion in the "Other Information" area, using code 69.

• Employers who contribute to registered pension plans (RPPs) or deferred profit sharing plans (DPSPs) for their employees have reported a pension adjustment (PA) in box (52) of the T4 slip. Enter only the dollar amount (no cents). Leave the box blank if the PA is zero or a negative amount, the employee died in the year or the employee is all paid up (for example, the employee no longer accrues new pension credits in the year, although he remains a member of the plan). The maximum limits for the 2013 money purchase plan is $24,270 while the DPSP limit is $12,135.

• Each employee receives a separate T4 for each province/territory in which performed work at an establishment of the employer. If an employee is receiving more than one T4 slip, ensure the PA (if applicable) is reported proportionately on each T4. If this is not possible, report the PA on one slip.

• Negative dollar amounts are not reported. To adjust amounts reported in previous years, send in an amended form for the year(s) concerned.

• Amounts are reported in Canadian currency only.

• Top-up amounts paid to employees receiving workers’ compensation benefits are reported on the T4. The actual workers’ compensation benefits are not reported on the form. With the exception of Quebec, workers’ compensation benefits are reported by the provincial/territorial boards on form T5007, Statement of Benefits. Commission de la santé et de la sécurité du travail (CSST) benefits in Quebec are reported by the CSST on form RL-5, "Prestations et indemnités."

• The 15-character account number you use to send in employee deductions is shown on all forms except copies of information slips that are provided to employees.

• A separate set of information slips and related summaries has been prepared for each payroll deductions account.

• If filing on paper, the totals you report on the summary forms match the totals you reported on the information slips.

• All relevant information (such as the codes and amounts that relate to employment commissions, taxable allowances or benefits, and deductible amounts that apply) has been entered in the "Other Information" area at the bottom of the T4 and the T4A.

• Employees have a valid social insurance number.

• The headings of any of the boxes have not been changed.

• The dollar sign ($) has not been printed or typed on the forms.

• The slips have been prepared clearly and in alphabetical order. If the form is computer generated or typed, use a standard 10 or 12 characters per inch (CPI) font.

• Hyphens or dashes have not been used between numbers or names.

• Where no amount is entered in a box, leave the box blank. Do not enter "nil."

• If you paid amounts to non-residents for services rendered in Canada that they did not perform in the ordinary course of employment, you must report this on a T4A-NR.

• If pensions, annuities or investment income were paid to non-residents, trusts or corporations, this must be reported on form NR4. The deadline for filing NR4 slips is Monday, March 31, 2014.