Legislative changes to keep in mind for Year-End 2024

Can you believe another year-end season is already here? It feels like just yesterday we were walking our clients through our 10-Step Year-End Checklist and helping them navigate new legislative changes. This year-end will be no different: as legislation evolves, so must your year-end processes!

As we head into the 2024 year-end payroll-processing season, we wanted to highlight a few changes to keep in mind in order to remain compliant as you start working through your to-do list:

1. Additional Canadian Pension Plan (CPP)/Québec Pension Plan (QPP) reporting requirements on employee tax forms.
2. Province of employment for remote workers.
3. Shift to electronic processes for year-end reporting.
4. Reporting requirements for the Canadian Dental Care Plan (CDCP).

Ready to dive into the details? Read on!

Additional CPP/QPP reporting requirements on employee tax forms

As of January 1, 2024, a second contribution and earnings ceiling for Canadian Pension Plan (CPP) and Québec Pension Plan (QPP) – which is known as CPP2 and QPP2 – opened for Canadian businesses and their employees.

You can read all about the nitty-gritty details of this update in our blog article, but the gist is this: eligible employees that exceed the Year’s Maximum Pensionable Earnings (YMPE) will contribute (along with employers) an additional percentage of income they earn above the first earnings ceiling up to the second earnings ceiling. It’s the employer’s responsibility to deduct and remit all CPP and QPP contributions, which includes the new second CPP/QPP contribution.

So, what does this change mean for year-end? For the 2024 tax year (and those that will follow), there are additional reporting requirements on employees’ T4 tax forms:

• The base and first enhanced CPP/ QPP contributions are still to be reported in Box 16/17.
• The second CPP contributions are to be reported in Box 16A.
• The second QPP contributions are to be reported in Box 17A.

If you have employees who report to or are paid by your Québec-based establishment, you may be required to file an RL-1 slip for the 2024 tax year. The updated RL-1 slip reflects the additional CPP/QPP reporting requirements as well:

• The total base contribution and first QPP contribution amounts previously entered in Box B now have to be entered in Box B.A.
• The total source deductions for the second QPP contribution are to be reported in Box B.B.
• A new information code, B-2, is to be used for entering the total source deductions for the second CPP contribution.
• Box U, used to calculate additional QPP contributions for a phased retirement arrangement, has been removed from the RL-1 slips and is replaced by an additional information code, G-3.

Payworks pro tip: If you’re a Payworks’ clients be sure to check out Steps 3 and 4 of our Year-End Checklist for support in generating Year-End reports to help identify any CPP/QPP shortages, and to ensure that all pay elements are reporting to the correct box and tax form.

Province of employment for remote workers

Canadian employers with full-time workers under remote work agreements should be aware of changes from the Canada Revenue Agency (CRA) and Revenu Québec (RQ) regarding Province of Employment (POE), which took effect January 1, 2024. 

You can read all about this update here on our blog, but the change essentially aims to draw a clear line between an employee’s province of employment and province/territory of residence, which can actually differ in some instances.

Why is it important to differentiate between the two? An employee’s POE is the basis for determining an individual’s CPP, QPP, Employment Insurance (EI), Québec Parental Insurance Plan (QPIP), and/or income tax deductions. An employee’s POE impacts which federal and provincial or territorial TD1 form is used and determines the appropriate payroll deductions. The POE is also reported to the CRA and RQ via an employee’s tax forms. It’s important to get the POE right because it ensures you’re applying and remitting the correct statutory deductions (and that employees are being paid correctly, too!).

For help determining an employee’s POE, check out this resource from the CRA: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/set-up-new-employee/determine-province-employment.html.

Shift to electronic processes for year-end reporting

We encourage our clients to go paperless for year-end to help streamline processes, save time, and provide an extra layer of security (bonus: it’s good for the environment, too!). The CRA and RQ have also moved in this direction by lowering their thresholds for mandatory electronic filing of income tax, meaning more Canadian businesses will need to file their 2024 tax forms electronically:

• The CRA has lowered the threshold of electronic filing for T4/T4A slips from 50 to five for the 2024 tax year.
• RQ has lowered the threshold of electronic filing for RL-1 slips from 51 to six for the 2024 tax year.

So, if you need to file more than five T4/T4A slips or six RL-1 slips this year, you must do so electronically or you may be subject to penalties.

The shift to electronic processes doesn’t stop there – as of January 1, 2024, payments or remittances to the Receiver General of Canada should be made as an electronic payment if the amount exceeds $10,000. Payers who do not submit payment over this amount electronically may be subject to penalties.

Honourable mention: reporting requirements for the CDCP

While not new to the 2024 tax year, we thought the CDCP deserved a spot on this list as some are still getting acquainted with this new reporting requirement. As a refresher: the Government of Canada’s Budget 2023 introduced the Dental Care Measures Act, which is the legislative bill establishing the CDCP. With this new bill comes a new reporting requirement on the T4 and T4A tax forms.

You can read more about how the CDCP impacts your year-end reporting, including these new T4/T4A boxes and codes, as well as how Payworks’ Payroll solution can help here: https://blog.payworks.ca/new-t4/t4a-boxes-added-explore-how-the-cdcp-changes-your-year-end.

Compliance is critical… and complicated!

Navigating year-end payroll processing can feel overwhelming, especially with the ever-changing landscape of Canadian payroll legislation. Fear not – we’re here to help guide you every step of the way, whether it’s through our one-to-one client support, user-friendly solutions, intuitive Year-End Checklist, or comprehensive library of resources. Best of all, our fan-favourite Payroll Guide is available to you 24/7 and free of charge, whether you’re a Payworks’ client or not! Download it today: https://www.payworks.ca/landing-pages/campaigns/payroll-guide.