You only process tax forms once a year – here’s what you might be forgetting

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:

1. Updating and including all employee information.
2. Double checking CPP/QPP deductions.
3. Review payroll and year-end reports.
4. Review box assignments.
5. Review tax form summary.

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) and Québec Pension Plan (QPP) contributions (and we’ll get to why that’s important later – hint: it has to do with overages and shortages of CPP and QPP 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.

Payworks pro tip: Changes from the CRA and RQ regarding province of employment (POE) took effect January 1, 2024. Make sure you're following the latest POE administrative policy!

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 sending 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 and QPP deductions

For tax forms submitted to the CRA

For employers completing T4s, employee CPP contributions under the first earnings ceiling are to be reported in Box 16; the second CPP contributions (known as CPP2) are to be reported in Box 16A, and the second QPP contributions (known as QPP2) are to be reported in Box 17A.

For tax forms submitted to Revenu Québec (RQ)

For employers completing RL-1s, employee QPP contributions under the first earnings ceiling are now to be reported in Box B.A (previously Box B); the second QPP contributions (known as QPP2) are to be reported in Box B.B, and the second CPP contributions (known as CPP2) are to be reported in Box B-2.

For a deep dive into the second contribution and earnings ceiling for CPP and QPP legislation, which took effect January 2024, visit: https://blog.payworks.ca/heads-up-important-cpp-qpp-legislation-changes-effective-january-2024.

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). Similar exemptions apply for QPP contributions – employees are exempt if they’re under the age of 18 or over the age of 73 (or if they’re 65 or older and have filled out a RR-50-V). It’s important to double-check there are no shortages or overages in your CPP/QPP 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 National Payroll Institute-trained Client Service Representatives (CSRs) recommend paying particular attention to:

• Year-to-date totals.
• CPP amounts.
• Employment Insurance (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, workers compensation, 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 tax form summary

A T4 summary and RL-1 summary display the tally of employee and employer contributions and are required by the CRA and RQ to be submitted in your payroll year-end process.

Before finalizing year-end, double check that the information and the totals included in the applicable tax form summary match the totals you’ve reported on your employee tax forms – such as the total contributions for CPP/QPP, EI, QPIP and income tax. The totals should reconcile with your remittances to the CRA/RQ.

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, National Payroll Institute-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.