As another year-end approaches, payroll practitioners are starting to prepare for the distribution and filing of tax slips for employees. Here’s an overview of some of the reporting requirements for the 2012 tax year as well as new compliance measures to get payroll prepared for the first pay run of 2013.
Temporary EI hiring credit for small business extended to 2012: The federal government has extended the temporary employment insurance hiring credit for an additional year. If an employer’s shares of EI premiums were $10,000 or less in 2011 and the premiums for 2012 have increased, it will be eligible for a refund of the difference up to $1,000.
New direct deposit option: Canada Revenue Agency (CRA) is now offering employers the choice to set up direct deposit to receive the EI hiring credit refund as well as refunds from GST/HST, payroll or corporate income tax. The organization must complete and file form RC366 to establish direct deposit.
Bill C-51 CPP changes: The legislation introduced in Bill C-51 changed the way Canada Pension Plan (CPP) contributions were administered for individuals collecting government pension benefits while continuing to work.
For employees under age 65, mandatory CPP contributions resumed in 2012, while employees aged 65 to 70 were given the choice to opt out by completing form CPT30 and filing it with the CRA and their employer.
As we near the end of the first year marking these changes, individuals who initially opted out of contributions for 2012 may choose to revoke their election and begin contributing to CPP again in 2013. A prior election can be revoked in the calendar year, following the year the election was originally filed, by submitting a new form CPT30 signed and dated in section D.
Upon receipt of a revocation form, employers should commence CPP contributions effective for the first pay run in the month following the date on the form.
There is no requirement for employees who wish to continue opting out to complete a new form. The originally filed CPT30 form remains in force unless the employee chooses to revoke it.
When preparing T4 slips in 2012 for individuals who have filed a CPT30 form opting out of CPP contributions, do not mark T4 box 28 with an “X” if the individual has no CPP deducted for the entire year. Instead, report “zero” as the pensionable earnings in box 26.
CPP and QPP rates and employee transfers in and out of Quebec: Revenu Québec increased the Quebec Pension Plan (QPP) rate to 5.025 per cent in 2012 with maximum 2012 contributions of $2,341.65, while CRA maintained the rate of 4.95 per cent to a maximum of $2,306.70 for CPP contributions.
This is the first time since 1997 that payroll professionals have had to administer different rates for these government pension programs. This has led to some challenges for employers that transfer employees in and out of Quebec.
If an employee transfers from Quebec to another province, then any QPP paid year-to-date is taken into consideration. The employee will not have more than $2,306.70 in combined QPP and CPP deducted for the tax year.
An employee who transfers to Quebec will have year-to-date CPP contributions taken into account; however, he will pay a maximum combined contribution of $2,341.65. This means an employee who has already paid the maximum CPP contribution for the year outside of Quebec will have to pay an additional $34.95 in QPP contributions and the employer will remit a matching contribution.
New taxable benefit: One of the announcements in the 2012 federal budget was that, effective with the first pay run of 2013, employers that provide accidental death and dismemberment insurance or critical illness insurance to employees must include a taxable benefit equal to the employers’ paid premium. Similar to life insurance, the value of the taxable benefit will include the provincial insurance taxes applicable in Manitoba (seven per cent), Ontario (eight per cent and Quebec (nine per cent).
New HSF rebate for Quebec employers that employ experienced workers: Revenu Québec will introduce a health service fund (HSF) rebate to private sector employers that have workers over the age of 65 beginning with the 2013 reporting year. Employers will be able to request a refund of excess HSF contributions during the four-year period following the end of the year in which they have paid wages to employees aged 65 or older.
The maximum refund per employee, based on 2013 contributions, will be $400; this will increase to $500 in 2014, $800 in 2015 and $1,000 in 2016.
Year-end can be a busy and stressful time for payroll practitioners. It is recommended they think of year-end as an ongoing process rather than a once-per-year activity.
Ensure that earnings, taxable benefits and deductions are accurately reported on a pay period basis throughout the year to maintain compliance with legislation. Periodically review and audit statutory deductions and reconcile your CRA and Revenu Québec remittance accounts. Finally, consider the use of a year-end checklist to ensure you have completed and filed all the required slips and returns on time.
Tina Beauchamp is a payroll consultant at the Canadian Payroll Association in Toronto. She can be reached at firstname.lastname@example.org.