Checklist for payroll practitioners to help with year-end reporting
With 2008 looming on the horizon, the following checklist is designed to help payroll practitioners with T4 year-end reporting. The deadline for filing T4 information slips and summary reports is Feb. 29, 2008.
Before submitting T4s, ensure the following items have been checked:
• No employee has contributed more than the 2007 Canada Pension Plan (CPP) contribution maximum of $1,989.90.
• No employee has contributed more than $720 in employment insurance (EI) premiums, the 2007 EI maximum for employees in all parts of Canada (except Quebec where the maximum EI premium is $584).
• Manual cheques have been included and cancelled cheques have been excluded from all year-to-date earnings totals and deductions totals reported on the T4 slips.
• All taxable benefits have been included as employment income in box 14 and reported using the appropriate codes in the “other information” area of the T4. The latter is especially important for individuals below the yearly pensionable (CPP) earnings. Remember that non-cash taxable benefits are not insurable, with the exception of board and lodging benefits provided in the same pay period that an employee receives cash earnings and an employer’s contribution to an employee’s registered retirement savings plan (not insurable if the contributions are “locked in”).
• Box 24 on the T4 (EI insurable earnings) is left blank if there are no insurable earnings, the earnings are the same as the amount reported in box 14 (employment income) or the insurable earnings are more than the maximum for the year ($40,000 for 2007).
• Box 26 (CPP/QPP pensionable earnings) on the T4 slip is completed only if the amount is different from the amount reported in box 14. Otherwise, leave the box blank.
• Ensure the CPP contribution or EI premium amounts reported on the T4 have not been adjusted if employee contributions were overdeducted. The Canada Revenue Agency (CRA) will credit employees with the overcontribution when they file their tax return. (To apply for a refund for a CPP and/or EI overpayment, complete form PD24, “Application for a Refund of Overdeducted CPP Contributions or EI Premiums.” Send it in with T4s if filing on paper. If filing electronically, send the form in separately by mail.)
• Employers that contribute to registered pension plans (RPPs) or deferred profit-sharing plans (DPSPs) for employees have reported a pension adjustment in box 52 of the T4 slip. Enter only the dollar amount (no cents). Leave the box blank if the pension adjustment is zero or a negative amount, the employee died in the year or the employee is all paid up (meaning the employee no longer accrues new pension credits in the year, although he remains a main member of the plan). Verify that maximum limits for 2007 are $20,000 for a money purchase plan and $10,000 for a deferred profit-sharing plan.
• Each employee receives a separate T4 for each province or territory in which he performed work at an establishment of the employer. If an employee is receiving more than one T4 slip, ensure the pension adjustment (if applicable) is reported proportionately on each T4. If this is not possible, report the pension adjustment on one slip.
• Negative dollar amounts are not reported.
• Amounts are reported only in Canadian currency.
• Top-up amounts paid to employees receiving workers’ compensation benefits are reported on the T4.
• The business number (BN) used to send in employee deductions is shown on all forms except copies of information slips provided to employees.
• A separate set of information slips and related summaries has been prepared for each payroll deductions account.
• The totals reported on the summary forms match the totals reported on the information slips.
• All relevant information (meaning the codes and amounts that relate to employment commissions, taxable allowances or benefits and deductible amounts that apply) is entered in the “other information” area at the bottom of the T4.
Annie Chong is manager of the Payroll Consulting Group at Thomson Carswell, which publishes the Canadian Payroll Manual and operates the Carswell Payroll Hotline. She can be reached at (416) 298-5085 or at [email protected].
Forms and guides
What’s new for the 2007 tax year
Beginning in 2008, employers that use payroll, commercial or in-house developed software will be able to file up to five megabytes (about 3,500 slips) using Internet file transfer.
T4 slip
The following codes for the “other information” area of the T4 are mandatory for 2007 (but were optional in 2006):
• 81 — placement or employment agency workers gross earnings;
• 82 — drivers of taxis or other passenger-carrying vehicles gross earnings;
• 83 — barbers or hairdressers gross earnings; and
• 84 — public transit pass.
The Canada Revenue Agency (CRA) has implemented an income exclusion for board and lodging allowances paid to members of certain recreational programs or sports teams. The exclusion is effective beginning in 2007. Up to $300 per month may be excluded from income for a board and lodging allowance provided to a participant or member of a sports team or recreational programs, if all of the following conditions are met:
• the employer is a registered charity or a non-profit organization;
• only individuals under the age of 21 take part in or are members of the team;
• the allowance relates to board and lodging for members who must live away from their ordinary place of residence; and
• the allowance does not relate to any services, including coaching and refereeing.
Employers are not to report the income exclusion on a T4 slip.
2007 year-end reporting is the last year the CRA will send employers a personalized T4 summary with the web access code pre-printed at the top. Beginning with 2008 year-end reporting (in December 2008), the CRA will send employers a letter that includes the web access code.
Before submitting T4s, ensure the following items have been checked:
• No employee has contributed more than the 2007 Canada Pension Plan (CPP) contribution maximum of $1,989.90.
• No employee has contributed more than $720 in employment insurance (EI) premiums, the 2007 EI maximum for employees in all parts of Canada (except Quebec where the maximum EI premium is $584).
• Manual cheques have been included and cancelled cheques have been excluded from all year-to-date earnings totals and deductions totals reported on the T4 slips.
• All taxable benefits have been included as employment income in box 14 and reported using the appropriate codes in the “other information” area of the T4. The latter is especially important for individuals below the yearly pensionable (CPP) earnings. Remember that non-cash taxable benefits are not insurable, with the exception of board and lodging benefits provided in the same pay period that an employee receives cash earnings and an employer’s contribution to an employee’s registered retirement savings plan (not insurable if the contributions are “locked in”).
• Box 24 on the T4 (EI insurable earnings) is left blank if there are no insurable earnings, the earnings are the same as the amount reported in box 14 (employment income) or the insurable earnings are more than the maximum for the year ($40,000 for 2007).
• Box 26 (CPP/QPP pensionable earnings) on the T4 slip is completed only if the amount is different from the amount reported in box 14. Otherwise, leave the box blank.
• Ensure the CPP contribution or EI premium amounts reported on the T4 have not been adjusted if employee contributions were overdeducted. The Canada Revenue Agency (CRA) will credit employees with the overcontribution when they file their tax return. (To apply for a refund for a CPP and/or EI overpayment, complete form PD24, “Application for a Refund of Overdeducted CPP Contributions or EI Premiums.” Send it in with T4s if filing on paper. If filing electronically, send the form in separately by mail.)
• Employers that contribute to registered pension plans (RPPs) or deferred profit-sharing plans (DPSPs) for employees have reported a pension adjustment in box 52 of the T4 slip. Enter only the dollar amount (no cents). Leave the box blank if the pension adjustment is zero or a negative amount, the employee died in the year or the employee is all paid up (meaning the employee no longer accrues new pension credits in the year, although he remains a main member of the plan). Verify that maximum limits for 2007 are $20,000 for a money purchase plan and $10,000 for a deferred profit-sharing plan.
• Each employee receives a separate T4 for each province or territory in which he performed work at an establishment of the employer. If an employee is receiving more than one T4 slip, ensure the pension adjustment (if applicable) is reported proportionately on each T4. If this is not possible, report the pension adjustment on one slip.
• Negative dollar amounts are not reported.
• Amounts are reported only in Canadian currency.
• Top-up amounts paid to employees receiving workers’ compensation benefits are reported on the T4.
• The business number (BN) used to send in employee deductions is shown on all forms except copies of information slips provided to employees.
• A separate set of information slips and related summaries has been prepared for each payroll deductions account.
• The totals reported on the summary forms match the totals reported on the information slips.
• All relevant information (meaning the codes and amounts that relate to employment commissions, taxable allowances or benefits and deductible amounts that apply) is entered in the “other information” area at the bottom of the T4.
Annie Chong is manager of the Payroll Consulting Group at Thomson Carswell, which publishes the Canadian Payroll Manual and operates the Carswell Payroll Hotline. She can be reached at (416) 298-5085 or at [email protected].
Forms and guides
What’s new for the 2007 tax year
Beginning in 2008, employers that use payroll, commercial or in-house developed software will be able to file up to five megabytes (about 3,500 slips) using Internet file transfer.
T4 slip
The following codes for the “other information” area of the T4 are mandatory for 2007 (but were optional in 2006):
• 81 — placement or employment agency workers gross earnings;
• 82 — drivers of taxis or other passenger-carrying vehicles gross earnings;
• 83 — barbers or hairdressers gross earnings; and
• 84 — public transit pass.
The Canada Revenue Agency (CRA) has implemented an income exclusion for board and lodging allowances paid to members of certain recreational programs or sports teams. The exclusion is effective beginning in 2007. Up to $300 per month may be excluded from income for a board and lodging allowance provided to a participant or member of a sports team or recreational programs, if all of the following conditions are met:
• the employer is a registered charity or a non-profit organization;
• only individuals under the age of 21 take part in or are members of the team;
• the allowance relates to board and lodging for members who must live away from their ordinary place of residence; and
• the allowance does not relate to any services, including coaching and refereeing.
Employers are not to report the income exclusion on a T4 slip.
2007 year-end reporting is the last year the CRA will send employers a personalized T4 summary with the web access code pre-printed at the top. Beginning with 2008 year-end reporting (in December 2008), the CRA will send employers a letter that includes the web access code.
