Why year-to-dates are important to review all year long

As we approach the end of the calendar year, it’s officially time to start focusing on the compliance-related aspects of payroll deductions and remittances – in particular, a simple, three-letter acronym that can have a big impact on your business.

YTDs (short for year-to-dates) are a running tally of the total gross compensation, net income, benefits and deductions since the start of the calendar year.

The best practice we can recommend to save time and stress (especially at the end of the year!) is to review YTDs on a regular basis. They build over time, and it’s important – especially after a busy year of staffing and payroll changes – to check in to ensure all details are aligned. Like most things, it’s easier to correct right away rather than up against a deadline (did we mention year-end is approaching?!).

Pro tip: When adding a new accrual or benefit, review your YTD totals for the next few pay periods to ensure those new amounts are represented as expected.

What are YTDs?

YTDs appear on employee pay statements and display the total of their personal compensation, benefits and deductions to date.

At a company level, YTDs provide an overview of all gross earnings, deductions, benefits and stat deductions for all staff (full-time and part-time employees, but also contractors, seasonal and casual workers).

Payworks client tip: Both active employee and companywide YTD totals can be viewed in the Payroll Register - found within the payroll reports generated every pay run. Navigate to the "Register Totals" section to view the companywide YTD totals.

Why are YTDs important?

• YTDs help in the creation and distribution of essential tax forms. The YTD totals on an employee’s last pay statement of the year should match the values on their tax form (plus or minus any adjustments that were made to the employee’s pay/deductions/benefits after the last pay of the tax year).

• YTDs provide insight into the amounts a business has deducted for tax remittances, which is later submitted to the Canada Revenue Agency (CRA) or Revenu Québec. With deductions such as Employment Insurance (EI), Canadian Pension Plan (CPP), Québec Pension Plan (QPP) and Québec Parental Insurance Plan (QPIP), there are both employee deductions taken and employer contributions made for remittances to the appropriate government agency.

• For contractors or freelance employees, it’s important for businesses to keep track of their YTD totals so that a T4A can be issued at year end (with the Fee for Service YTD total in Box 48).

• For seasonal or casual workers, it’s important to track YTD totals because a T4/RL-1 must be issued for any employment income that has statutory deductions (like federal income tax and provincial income tax in Québec) or exceeds $500 for the calendar year.

Payworks client tip: The “Payroll Register” report shows only the YTD totals for the active employee portions of EI, CPP, CPP2, QPP, QPP2, and QPIP on individual employee entries. The YTD totals for the business, with employer and employee portions, is displayed in the “Register Totals” section – the summary at the end of the report, which displays the YTDs totals of all active and non-active employees.

Ensuring YTD amounts are correct (and paid on time) is SUPER important for your business!

Accurate YTDs are crucial to ensure both the employee and employer are compliant with legislated remittance obligations for statutory deductions and employer contributions.

• Late penalties can be costly. There are varying penalties and fees dependent on how late the payment is. For more information, visit: https://www.canada.ca/en/revenue-agency/services/payments/payments-cra/interest-penalties-late-incorrect-payments.html. 

• If you haven’t deducted enough, there is also penalty for failure to deduct. Plus, requesting money back from an employee is difficult and even potentially damaging to the working relationship. Even if a business can’t recover the difference, they’re still accountable for the discrepancy. For more information, visit: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/calculating-deductions/making-deductions.html. 

• YTDs can be a great gauge of whether or not you’re deducting too much. Deductions for CPP, QPP, EI, and QPIP should not exceed the legislated maximum contribution amounts for the tax year. Important note: those amounts change every calendar year! For an up-to-date, consolidated list of the amounts, download our free Payroll Guide by visiting https://info.payworks.ca/en-ca/payroll-guide-for-canadian-business.

Pro tip: it’s especially important that YTDs are reviewed for employees who work in more than one jurisdiction or under more than one business number during the year. For compliance, a separate tax form must be issued for each province or business number where employees have taxable income.

Pro tip: when reviewing YTD totals, it’s important to know whether or not terminated employees are included. If an employee received remuneration and/or deductions within the calendar year but is not employed to-date, businesses might want to adjust their reports to accurately capture all of their YTD information for the year.

How to stay on top of your YTDs

The straightforward answer is: reviewing those payroll reports on a regular basis!

This is a great way to see if there are any warnings or shortages – which lets you start untangling those future knots before any pressing year-end deadlines. While these preview reports can only reflect the payroll data to date, they certainly can illuminate any loose ends that can be preemptively tied up.

Payworks client tip: The pay element setup and the box report provide a heads up on how existing payroll data feeds into the required tax forms, and will flag any missing information that can be gathered upfront.

Payworks client tip: If you suspect your YTD totals are not accurately reflecting what should’ve been paid or deducted, the first place to check is the “Audit Trail” report. This is the spot to review all previous YTD adjustments or overrides made throughout the calendar year, if any.

Cover your bases with reliable payroll, plus all the bells and whistles like a complete year-end package: https://www.payworks.ca/solutions/payroll.