Budget change expected to see employers save over $100 million annually
The 2017 federal budget contained some happy news for payroll and human resources professionals: Employers are now allowed to distribute T4s electronically to employees without having to obtain express consent from the relevant employee in advance.
Currently, issuers of information returns are required to provide two copies of the relevant portion of the return to the taxpayer, either by sending the return to his last known address or delivering it to him. These copies may be sent electronically only if the taxpayer gives express consent in advance.
The change announced in the budget is expected to improve the efficiency and effectiveness of payroll administration.
“E-T4s are more secure and this change will save employers over $100 million annually… because the cost of administering a paper T4 is $5 per slip and over 20 million slips are never used,” says Patrick Culhane, president of the Canadian Payroll Association.
The association has been advocating for the change in legislation since 2008 and in 2009, it co-developed a pilot project to enable some employers to voluntarily submit e-T4s to some employees. The project required that employees had confidential access to view or print their T4s. The CPA then advocated that all employers should benefit from the same electronic efficiencies because such modernization would reduce the paper and cost burden for employers.
The e-T4 success resulted in the Quebec government moving forward with electronic Relevé 1s (e-RL-1s) as a harmonization measure with the federal government. Electronic RL-1s will save employers an additional $30 million annually.
Next logical evolution
Eighty-four per cent of Canadians file their personal tax returns electronically with the Canada Revenue Agency (CRA).
Canada’s 1.5 million employers annually pay more than $928 billion in wages and taxable benefits, $313 billion in payroll remittances (including personal income tax, Canada Pension Plan and employment insurance (EI) contributions) to federal and provincial governments, and $177 billion in health and retirement benefits.
They also create, print and distribute more than 26 million T4s, nine million T4As and seven million RL-1s to comply with the current paper-based tax administrative processes. These payroll remittances represent more than 60 per cent of federal government revenues and are significantly more than corporate and consumption taxes combined.
But 95 per cent of Canadian workers prefer to receive T4s electronically or are neutral, while one-third of employers indicated they already provide e-T4s to employees, according to a CPA survey of 5,600 employees in 2016.
Electronic T4s are more secure than paper T4s and are the next logical extension of technology after electronic funds transfers (used by 97 per cent of employers) and electronic pay statements (used by 80 per cent of employers).
Impact on payroll
Budget 2017 said the Income Tax Act and Regulations will be amended so an employer can provide a T4 as a single document in an electronic format unless:
•the employee specifically requests her T4 be provided in print
•the employee cannot reasonably be expected to have access to the T4 in electronic format
•the employee is non-active.
The criteria regarding privacy and access issues for electronic slips was released by the government in May and is consistent with those used in the pilot.
For employers switching to the new format, HR should communicate this change to employees and provide a detailed explanation of how to access their T4 or RL-1 information electronically. Printed copies must be available upon employee request, and to employees who are no longer active. HR and payroll staff can also provide the finance department with projected savings, based on the cost of paper slips that will no longer be needed.
Ultimately, the ability to deliver e-T4s and e-RL-1s to employees as the standard delivery method benefits employers and employees — at no additional cost to the government. It will create huge paper and costs savings for employers, helping them to reduce their carbon footprint. Employees will have ongoing records of their electronic T4s and can rest assured the delivery of their tax slips will be safe, secure and convenient.
Rachel De Grâce is the Toronto-based manager of advocacy and legislative content at the Canadian Payroll Association. For more information, visit www.payroll.ca.
