Commonly asked questions and answers from the Carswell Payroll Hotline
With the holiday season upon us life becomes more hectic. It’s even more so for payroll practitioners busy making sure year-end reports and forms are processed. Canadian HR Reporter asked the Carswell Payroll Hotline, publishers of the Canadian Payroll Manager, for assistance for those tasked with ensuring all goes well. In addition to some commonly asked questions, a handy year-end checklist is available online by clicking on the related articles link at the end of this article.
Question: We have employees across Canada and we have a number of employees who worked in more than one province or territory during the year. Do we have to issue a separate T4 for each province/territory in which they performed work?
Answer: Each employee must receive a T4 for each province/territory in which he performed work at an establishment of the employer. Report on each T4 the total remuneration received during the year. For services rendered in the province of Quebec, the employee must receive a T4 for Quebec and the provincial RL-1 slip.
Question: Our company has a group insurance plan that covers employees’ life insurance, dependant life insurance, accidental death and dismemberment (AD&D), private health insurance (including prescription drugs, health, dental and vision), short-term disability (STD) and long-term disability (LTD). If the employer pays for the premiums on behalf of the employees to cover the cost of the group insurance plan, does a taxable benefit result and if so, where is it reported at year-end?
Answer: When an employer pays the premiums on behalf of employees for certain types of group insurance benefits, the benefit may be taxable depending on the type of coverage offered.
Federal legislation requires all premiums paid by the employer on behalf of the employee for group term life insurance coverage to be treated as a taxable benefit to the employee. This includes personal coverage as well as dependant coverage. Any employer-paid premiums for AD&D, private health insurance, STD or LTD offered under a group plan are not taxable benefits to the employee.
Quebec provincial legislation also requires all premiums paid by the employer on behalf of the employee for group term life insurance coverage to be treated as a taxable benefit to the employee. In addition, employer-paid premiums for AD&D and private health insurance are also considered taxable benefits. STD and LTD offered under a group plan are not taxable for Quebec employees.
For federal year-end reporting the taxable benefit resulting from group term life insurance coverage is reported on the T4 in box (14) and code (40).
For Quebec provincial reporting the taxable benefit resulting from group term life insurance and AD&D coverage is reported in boxes (A) and (L) and the taxable benefit for private health insurance coverage is reported in boxes (A) and (J) of the RL-1.
Question: For year-end reporting purposes, where do I report the group term life insurance taxable benefit for former employees (retirees)?
Answer: Where an employer continues to provide group term life insurance for retirees after their employment (the employee-employer relationship no longer exists), the taxable benefit would be reported as “Other Income” in box (28) of the T4A slips (footnote code 19) and boxes (A) and (L) of the RL-1, where applicable.
Question: We had an employee pass away partway through the year. How do we calculate the Canada/Quebec Pension Plan (C/QPP)?
Answer: There are circumstances when the maximum CPP/QPP contribution should be prorated.
Prorate CPP when:
•an employee turns 18 in the year — use the number of months after the month in which the employee turns 18;
•an employee turns 70 in the year — use the number of months up to and including the month the employee turns 70;
•an employee is receiving Canada pension — use the number of months before the month the employee begins to collect the pension;
•an employee is collecting a disability pension under the CPP — use the number of months before the month in which the employee begins to collect the disability pension; or
•an employee dies in the year — use the number of months up to and including the month of death.
For the purposes of Quebec Pension Plan, prorate QPP when:
•an employee turns 18; or
•an employee is collecting a disability pension.
Question: Our last pay period in 2004 runs from Dec. 26 to Jan. 8, 2005. Because it overlaps into the next calendar year, should I report the earnings from Dec 26 to Dec. 31 on the 2004 T4s and RL-1s and Jan. 1 to Jan. 8 on the 2005 T4s and RL-1s?
Answer: Although the last pay of 2004 reflects two taxation years, paycheques dated January 2005 must be reported on the 2005 T4 and RL-1 slips. Reporting is required in the year in which the earnings are actually paid to the employee, regardless of when the wages were actually earned by the employee.
For more information contact Carswell’s Payroll Hotline at (800) 661-6828.
Question: We have employees across Canada and we have a number of employees who worked in more than one province or territory during the year. Do we have to issue a separate T4 for each province/territory in which they performed work?
Answer: Each employee must receive a T4 for each province/territory in which he performed work at an establishment of the employer. Report on each T4 the total remuneration received during the year. For services rendered in the province of Quebec, the employee must receive a T4 for Quebec and the provincial RL-1 slip.
Question: Our company has a group insurance plan that covers employees’ life insurance, dependant life insurance, accidental death and dismemberment (AD&D), private health insurance (including prescription drugs, health, dental and vision), short-term disability (STD) and long-term disability (LTD). If the employer pays for the premiums on behalf of the employees to cover the cost of the group insurance plan, does a taxable benefit result and if so, where is it reported at year-end?
Answer: When an employer pays the premiums on behalf of employees for certain types of group insurance benefits, the benefit may be taxable depending on the type of coverage offered.
Federal legislation requires all premiums paid by the employer on behalf of the employee for group term life insurance coverage to be treated as a taxable benefit to the employee. This includes personal coverage as well as dependant coverage. Any employer-paid premiums for AD&D, private health insurance, STD or LTD offered under a group plan are not taxable benefits to the employee.
Quebec provincial legislation also requires all premiums paid by the employer on behalf of the employee for group term life insurance coverage to be treated as a taxable benefit to the employee. In addition, employer-paid premiums for AD&D and private health insurance are also considered taxable benefits. STD and LTD offered under a group plan are not taxable for Quebec employees.
For federal year-end reporting the taxable benefit resulting from group term life insurance coverage is reported on the T4 in box (14) and code (40).
For Quebec provincial reporting the taxable benefit resulting from group term life insurance and AD&D coverage is reported in boxes (A) and (L) and the taxable benefit for private health insurance coverage is reported in boxes (A) and (J) of the RL-1.
Question: For year-end reporting purposes, where do I report the group term life insurance taxable benefit for former employees (retirees)?
Answer: Where an employer continues to provide group term life insurance for retirees after their employment (the employee-employer relationship no longer exists), the taxable benefit would be reported as “Other Income” in box (28) of the T4A slips (footnote code 19) and boxes (A) and (L) of the RL-1, where applicable.
Question: We had an employee pass away partway through the year. How do we calculate the Canada/Quebec Pension Plan (C/QPP)?
Answer: There are circumstances when the maximum CPP/QPP contribution should be prorated.
Prorate CPP when:
•an employee turns 18 in the year — use the number of months after the month in which the employee turns 18;
•an employee turns 70 in the year — use the number of months up to and including the month the employee turns 70;
•an employee is receiving Canada pension — use the number of months before the month the employee begins to collect the pension;
•an employee is collecting a disability pension under the CPP — use the number of months before the month in which the employee begins to collect the disability pension; or
•an employee dies in the year — use the number of months up to and including the month of death.
For the purposes of Quebec Pension Plan, prorate QPP when:
•an employee turns 18; or
•an employee is collecting a disability pension.
Question: Our last pay period in 2004 runs from Dec. 26 to Jan. 8, 2005. Because it overlaps into the next calendar year, should I report the earnings from Dec 26 to Dec. 31 on the 2004 T4s and RL-1s and Jan. 1 to Jan. 8 on the 2005 T4s and RL-1s?
Answer: Although the last pay of 2004 reflects two taxation years, paycheques dated January 2005 must be reported on the 2005 T4 and RL-1 slips. Reporting is required in the year in which the earnings are actually paid to the employee, regardless of when the wages were actually earned by the employee.
For more information contact Carswell’s Payroll Hotline at (800) 661-6828.
