You only process tax forms once a year – here’s what you might be forgetting
Jan 10, 2023Resources
If you’re responsible for payroll, we don’t have to tell you that it’s complicated. And while you might have a great rhythm for the day-to-day tasks that ensure employees are paid accurately and on time, the end of the calendar year can throw a few curve balls into the mix. Year-end payroll processing can be time consuming and hard to manage, in addition to keeping on top of new legislation that might’ve changed over the course of the year…
We get it: since you only process employee tax forms once a year, it’s all too easy for some of those once-a-year tasks to simply and subtly fly under the radar. Don’t wait until it’s too late to wrap your head around it! To help, we’ve compiled a list of a few things you might be forgetting when processing year-end:
Updating and including all employee information
You might be thinking, “well, duh?” However, if you accidentally forget to populate Box 12 – for an employee’s Social Insurance Number (SIN) – your business could be subject to a Canada Revenue Agency (CRA) penalty of $100 per missing SIN.
Payworks pro tip: If an employee receives a permanent SIN later in the year, ensure that updated information is reflected in Box 12.
It’s also important to ensure you have all employees’ dates of birth (DOB). An employee’s age determines whether or not they’re exempt from Canada Pension Plan (CPP) contributions (and we’ll get to why that’s important later – hint: it has to do with overages and shortages of CPP totals!).
For businesses with hybrid or remote employees or for businesses with employees working in more than one jurisdiction, it’s important to pay attention to Box 10 – the province of employment. The province of employment can differ from the jurisdiction of the employer, and that has tax implications you definitely shouldn’t overlook.
Other employee information to double check, as it could’ve changed within the past calendar year, includes:
- First and last names
- Physical mailing addresses
- Email addresses
This information is important when considering how employee tax forms are distributed, as the CRA states that businesses must “receive written consent from employees before ending T4 slips by email,” and “if an employee’s address is known to be incorrect, T4 slips must not be sent to that address.”
Payworks pro tip: Electronic distribution of employee tax forms can be completed through our Employee Self Service (ESS) instead of by email. This provides businesses with an extra layer of security in providing access to tax slips through a secure online portal.
Also, don’t forget to reach out to former employees that received earnings in the past calendar year. Determine how former employees will receive their tax forms and check with them to see if their information – particularly their address – has changed.
We told you we’d get to it later… Double check there’s no shortages or overages for CPP deductions
Employee CPP deductions are shown in Box 16 if the employee’s province of employment is not Québec. Ensuring these deductions add up correctly can be tricky, because employees are exempt from CPP contributions if they’re under the age of 18 or over the age of 70 (or if they’re over the age of 65 and have filled out a CPT30). But it’s important to double-check there are no shortages or overages in your CPP deductions before finalizing year-end tax forms.
Review payroll and year-end reports
The best practice we share with our clients is to start reviewing their year-end payroll reports mid-November, and continue to review those reports until the last pay run of the calendar year. Our NPI-trained Client Service Representatives (CSRs) recommend paying particular attention to:
- Year-to-date totals
- CPP amounts
- EI amounts
- Taxable benefit amounts
Another tip to apply when reviewing year-end payroll reports is to include terminated employees for an accurate representation of your year-to-date totals.
Payworks pro tip: Before finalizing your payroll year-end, ensure you’ve recorded any payments made outside of the Payworks application before the last payroll run of the year.
Review box assignments
Another important component to double check before finalizing year-end is box assignments. This means ensuring the proper totals for pay elements such as earnings, deductions, benefits, WCB, provincial tax, commissions, pension, etc. are all mapped to the correct boxes on the tax forms. A few specifics to consider when reviewing:
- Review where the totals for benefits are mapping to, as there are separate boxes for taxable and non-taxable benefits.
- If applicable, registered pension plan numbers are required on the tax form, as well as the totals for employee and employer contribution amounts.
- If a union doesn’t issue a receipt to employees for union dues, they need to be reported on the tax form in Box 44 – and initiation fees are not to be included in the total.
- As a general rule, negative values should never appear.
Payworks pro tip: Our application generates a box report, which is a condensed summary of all of the tax forms and is handy to consult when reviewing pay elements and the corresponding box assignments – especially at the very bottom, where it outlines pay elements with year-to-dates.
Review your T4 summary
A T4 summary displays the tally of employee and employer contributions and is required by the CRA to be submitted in your payroll year-end process.
Before finalizing year-end, double check that the information and the totals included in the T4 summary match the totals you’ve reported on your employee tax forms – such as the total contributions for CPP, employment insurance (EI) and income tax. The totals should reconcile with your remittances to the CRA.
Payworks pro tip: Our application generates the T4 summary as part of the year-end process, and as with government remittances, we also file the T4 summary on our clients’ behalf after they’ve finalized year-end by the deadline! Clients can double check the information on the T4 summary form data on the box report (mentioned above).
Still processing year-end tax forms manually? Payworks makes it easier to get year-end payroll processing done. We take the stress out of tax season with a year-round Warnings widget and an interactive year-end checklist, all backed by dedicated, NPI-trained CSRs that you can reach out to at any time. We even file those remittances for you, so you won’t miss a step.
We think you just might love it – to learn more, visit: https://www.payworks.ca/solutions/payroll.
Key topics in this article:ResourcesT4 SeasonYear EndPayroll ResourcesFinanceBusiness OwnerSMEPayroll Management