Gearing up for year-end

With 2016 almost over and February fast approaching, payroll professionals are turning their attention to finalizing Jan. 1 changes and preparing for 2016 year-end reporting. T4s, T4As, T4A-NRs, RL-1s and RL-2s are due by Feb. 28.

The following tips can help payroll professionals stay on top of 2016 year-end reporting requirements:

Prepare T4s for individuals who, in the ordinary course of an office or employment, received remuneration during the year, where Canada/Quebec Pension Plan (C/QPP) contributions, Employment Insurance (EI) premiums, Quebec Parental Insurance Plan (QPIP) premiums or income tax were required to be deducted or if their remuneration exceeded $500. Remuneration includes salary, wages, bonuses, vacation pay, commissions, taxable benefits, taxable allowances and retiring allowances.

Complete T4As to report the following types of remuneration, if it was more than $500 or you deducted income tax from it: pension or superannuation payments; lump-sum payments; self-employed commissions; annuities; patronage allocations; or other income described in the Canada Revenue Agency’s (CRA) guide Deducting Income Tax on Pension and Other Income, and Filing the T4A Slip and Summary (RC4157). 

If you paid amounts to non-residents for services rendered in Canada that they did not perform in the ordinary course of employment, report them on a T4A-NR. If you paid or credited pensions, annuities or investment income to non-residents, trusts or corporations, use form NR4 to report the amounts. The filing deadline for NR4s is Mar. 31.

Besides reporting earnings and deductions to the CRA, employers with Quebec employees must also prepare a year-end information return for Revenu Québec. It requires employers to complete RL-1 forms for employees who reported to work at their place of business in Quebec or who were paid from their business in Quebec if they were not required to report to work. Employers must report all salaries and wages regardless of the amount and whether they took source deductions. Use RL-2s to report retirement and annuity income. RL-1 and RL-2 forms are only available in French, but Revenu Québec provides an English translation of the box names.

When completing forms, report earnings based on the year paid, not on the year the employee earned them.

For T4 boxes 16 and 17, the 2016 maximum employee CPP contribution is $2,544.30. For QPP, it is $2,737.05. On an RL-1, report QPP contributions in box B. Do not report CPP contributions in box B. Instead, enter code B-1 in one of the boxes in the Renseignements complémentaires area, followed by the amount of CPP contributions.

For T4 box 18, the maximum employee EI premium for 2016 is $955.04 for employees in all parts of Canada, except Quebec. For Quebec employees, it is $772.16. On an RL-1, use box C to report EI premiums.

In T4 box 24, report the total amount used to calculate the employee’s EI premiums, up to $50,800, the maximum insurable earnings for 2016. If the employee had no insurable earnings, enter “0.” 

In T4 box 26, enter the employee’s C/QPP pensionable earnings for the year, up to $54,900, the maximum for 2016. On an RL-1, report the employee’s QPP pensionable earnings, up to $54,900, in box G. If the employee had no pensionable earnings, enter “0.” 

If the employee contributed to both the CPP and the QPP, complete two T4 slips: one showing the QPP deducted and the applicable pensionable earnings and remuneration the employee earned in Quebec, and the other showing the CPP deducted and the applicable pensionable earnings and remuneration earned in the other jurisdiction. On an RL-1, enter code G-2 in one of the boxes in the Renseignements complémentaires area, followed by the total amount of CPP pensionable earnings reported in box 26 on the T4.

Report the employee’s QPIP premiums on a T4 in box 55. In box 56, enter the total amount used to calculate the premiums, up to $71,500, the maximum for 2016. Leave the box blank if there are no insurable earnings, the insurable earnings are the same as employment income reported in box 14, or the insurable earnings are over the maximum for the year.

For an RL-1, report employee QPIP premiums in box H. The maximum employee premium for 2016 is $391.82. Leave the box blank if you did not deduct any premiums. Do not adjust the amount if you deducted too much. Report the total amount of salary or wages from which you deducted QPIP premiums in box I, up to the $71,500 maximum for 2016.

If you over-deducted CPP contributions or EI premiums, do not adjust the amounts reported on the T4. The CRA will credit the employee with the over-contribution when he or she files a personal income tax return. To apply for a refund for the employer overpayment, complete and submit form PD24, Application for a Refund of Overdeducted CPP Contributions or EI Premiums.

If you issued manual cheques during the year, include them in all year-to-date earnings and deductions totals reported on T4s and T4As. Exclude all cancelled cheques.

Include all taxable benefits in employment income and make sure that corresponding source deduction totals have been updated. 

Report group term life insurance taxable benefits in the “Other Information” area of the T4 using code 40 for current employees. For retired employees, report the benefit in the “Other Information” area of a T4A, using code 119 even if the total amount of all benefits paid in the calendar year is $500 or less. Multi-employer plan administrators or trustees who provide group term life insurance taxable benefits to retirees, current employees or former employees must report the benefit on a T4A only if it is more than $25. 

Report retiring allowances in the “Other Information” area of the T4. Use code 66 to report the amount of the retiring allowance that is eligible for tax-free transfer to a registered pension plan (RPP) or registered retirement savings plan (RRSP) (code 68 for Status Indians). Use code 67 to report the amount that is not eligible for transfer (code 69 for Status Indians). 

Report a pension adjustment (PA) in T4 box 52 if the employer contributed to an RPP or a deferred profit-sharing plan (DPSP) for the employee. Enter only the dollar amount (no cents). Leave the box blank if the PA is zero or a negative amount, the employee died in the year or the employee is all paid up. The maximum contribution limit for 2016 for money purchase plans is $26,010 and for DPSPs, it is $13,005.

If an employee worked in more than one province/territory during the year, complete a separate T4 for each jurisdiction. Ensure that the PA (if applicable) is reported proportionately on each T4. If this is not possible, report the PA on one slip. 

Make sure you have a valid social insurance number for each employee and that you have correctly reported it on the information slips. 

Report all amounts in Canadian currency. For RL-1s, if this is not possible, enter “200” in one of the blank boxes in the Renseignements complémentaires area, followed by the type of currency used.

The CRA requires employers using paper T4s, T4As, T4A-NRs or NR4s to also file a related summary form. Employers filing electronically do not complete a separate summary form. For Revenu Quebec, employers must complete RL-1 summary forms.

Give employees two copies of their T4, T4A, T4A-NR and NR4 form by delivering them in person or mailing them to each employee’s last known address. If the employee is no longer employed by the employer and the mailed slips are returned, keep the slips with the employee’s file.

Instead of providing printed copies of the forms, employers may give employees T4, T4A, T4A-NR and NR4 slips in an electronic format as long as employees have consented to this in writing.

Give Quebec employees copy 2 of the RL forms. Employers may provide a paper version or, if they have the employee’s written consent, an electronic version.

Employers with up to 50 information slips of one type to file for a calendar year may file their returns on paper or over the Internet.

Employers with more than 50 information slips of one type to file must file over the Internet. Both the CRA and Revenu Québec can penalize employers who fail to do this, with penalties ranging from $250 to $2,500, depending on the number of information slips by type the employer failed to file over the Internet. 

Filing on CDs, DVDs, USB keys or diskettes is no longer permitted. 

To change information on a T4 or RL slip already sent to the CRA or Revenu Québec, file an amended form. Follow the procedures set out in the CRA’s Employers’ Guide – Filing the T4 Slip and Summary (RC4120) and Revenu Québec’s Guide to Filing the RL-1 Slip: Employment and Other Income (RL-1.G-V). The guides also provide information on how to cancel slips.

If employees lose their T4, employers may give them a replacement slip. Mark the slip as “DUPLICATE” and keep a copy for your records. Do not send a copy to the CRA. Revenu Québec follows a similar procedure.

Before submitting the forms, it is always wise to check and double check them. This may not only reduce the need for issuing amended forms, it could also help to avoid a CRA Pensionable and Insurable Earnings Review (PIER) report.

The CRA issues PIER reports when it determines that the amounts an employer reported for C/QPP contributions and/or EI premiums do not match the amounts required based on its Payroll Deductions Tables. Besides having to check and correct the errors shown on the PIER report, payroll professionals may also have to remit an outstanding balance to the CRA, which could include interest charges.

Staying organized, starting early and sticking to the rules can help to make year-end reporting less stressful.

Note: The tips are based on information available in October. Check the CRA and Revenu Québec websites and updated guides for any changes.