Getting ready for electronic T4s

While year-end reporting may seem far off, it is not too early to start thinking about it now, especially with a coming change to the rules for delivering T4s and RL-1s to employees.

Beginning with 2017 year-end reporting, the Canada Revenue Agency (CRA) will allow employers who meet certain conditions to issue T4 forms to employees electronically without first having to obtain their consent. The Quebec Finance Ministry has announced that Revenu Québec will implement a similar measure for RL-1s. The change will not apply to any other forms.

Currently, employers may only provide an employee with a T4 electronically if the employer has the employee’s consent to do so. Employers who do not have consent must two issue paper copies of the form.

Under the new rules, employers will be allowed to use e-T4s as the standard delivery method if they provide a secure electronic portal that an employee can use to access the T4 and a secure site for printing it. They must also give employees the option to receive paper copies of the form if they request it.

The CRA states that employers who do not meet these conditions will not be able to issue T4s electronically unless they had already obtained the employee’s consent to do so.

Despite the rule change, employers will still have to provide workers with two paper copies of the T4 if, at the time they issue it, the employee is off work on an extended leave or is no longer employed, or if it would be unreasonable to expect the worker to obtain the form electronically.

A survey conducted last year for the Canadian Payroll Association (CPA) found that about one-third of employers already issue T4s electronically to employees. CPA president Patrick Culhane said he expects the number to increase as a result of the new rules.

The CPA has been advocating for e-T4s to be the standard method of delivery since 2009, saying it would save money and reduce paperwork for employers at no cost to the government.

“It became our top advocacy item in 2011. It’s been a long time coming,” said Culhane.

He said CRA data shows that about 84 per cent of employees file their personal tax returns electronically, meaning that there is no need for employers to print and mail about 20 million T4s each year.

“You look at a paper T4, it’s $5 a slip. It doesn’t sound like a lot of money, but when you’ve got 20 million of them not being used annually, that’s $100 million a year,” he said.

E-T4s are more secure than paper ones, said Culhane.

“Paper T4s have a bigger chance of being compromised than e-T4s. If something is in a secure system, it’s hard to get into. Once something has been printed, it could be lost in the mail. It could end up in somebody else’s hands, a number of different things could happen,” he said.

E-T4s can also save time for payroll professionals, said Marlo Hertling, director of marketing and communications at Avanti Software. The company offers its clients two options for delivering tax slips electronically: they can provide them through an employee self-service portal or they can send them via e-mail in a secure PDF format.

“By having those available electronically and being able to go reference them electronically or print them whenever they want, that’s really convenient. And it saves the payroll team all of those calls from employees to say, ‘Can you get me another copy?’ ‘Can I find out what my numbers are?’ those kind of things that traditionally they have had to deal with at that time of year,” she said.

By eliminating the need for prior consent, the federal and Quebec governments are making electronic distribution of T4s and RL-1s easier for both employers and employees, said Hertling.

“When you had to get the employee’s permission, you did have to have things like audit trails in place and those can be time consuming,” she said.

“We stored it electronically in our database. When an employee clicked ‘yes’ to that, then obviously we had that audit trail stored, but for anyone who was trying to deliver them through email or through other electronic versions, you had to keep track of who had given you permission and you had to have a copy of that,” said Hertling.

“Those are all just administrative burdens for payroll folks and, quite frankly, employees because now they’ve got more paperwork to fill out and get back to the payroll department,” she said.

It is not too early for payroll professionals interested in electronic delivery of T4s to start planning for it now, said Hertling. She advised that they talk to their software vendor or payroll service provider about issues such as how they will provide electronic forms, the security that will be in place for them and how easy it will be for employees to access their form.

For instance, will they be able to see it on their mobile device or will they need to be on a desktop computer?

“Have the conversation with your vendor to understand how you can make that as easy as possible for your employees,” she said.

“As an example, in Avanti, one of the things that we allow employers to do is configure their own self-service menu. At (year end), they might want to move tax slips on their menu from being one of the last items to being the first item that employees see. It’s all about convenience and experience. With a simple click of a button, instead of having pay statements be the first thing that employees see when they come in, let’s make it tax slips because we know that in February that’s really what they want to see.”

While some employers may worry about getting employees on board with technology changes such as electronic delivery of pay statements or T4s through employee self-service portals, Hertling said in her experience the vast majority of employers are delighted at how quickly employees adapt to it.

In fact, the CPA’s survey showed that many employees are already onside with e-T4s. It found that 95 per cent of 5,600 employees polled were either neutral or would prefer to receive their T4s electronically.

“The reason is that most employees look at electronic submission of payroll data as standard,” said Culhane. “Ninety-eight per cent of us are paid using electronic funds transfer. Over 80 per cent of us get electronic pay statements. The e-T4 is the next logical extension of the application of technology for communication.”

Hertling recommended that payroll departments planning to move to e-T4 distribution start giving employees advance notice of the change now.

“It really comes down to communication,” she said. “The more that they can share with their employees about how it is going to work, where they are going to have access from and how they will be able to access it, the better off it is (because) any troubleshooting comes back to the payroll department.”

She suggested that payroll departments prepare a notice about the change and send it out through either an employee self-service portal or email.

Avanti has created the following note for its clients that Hertling said all employers are welcome to use:

“Next year your tax slips will be electronic. The Canadian government has recently announced that all employees can now receive their tax slips electronically. As a result, we here at [company name] have decided to get on board and provide all employees with electronic tax slips for the 2017 tax year. We want to let you know well in advance so that you are prepared and if you haven’t already, you can start getting comfortable with using the employee self-service portal,” it said.

“Why is this initiative important to our business? Tax slips cost an average of $5 per employee and by going electronic we will be able to invest savings better for our company. For additional information or if you need help using the self-service portal, please contact one of your payroll team and we will be happy to help you.”

In the long run, Culhane said the CPA would like the CRA and Revenu Québec to eliminate forms altogether.

“Our vision is that we move away from thinking about forms and think about data transmissions,” he said.

Until that time comes, though, electronic delivery is a welcome improvement, said Culhane.