What payroll needs to know to end the year

Frequently asked questions about payroll's year end

Holiday season is especially hectic for payroll practitioners as they make sure their year-end reports and forms are processed. To make payroll’s job a little easier, Canadian HR Reporter enlisted the help of the Carswell Payroll Hotline, publishers of the Canadian Payroll Manual, to provide answers to some of the most frequently asked questions about year end.

Question: When processing our 2005 year end, we noticed some of our employees have overpaid their Canada or Quebec Pension Plan contributions and Employment Insurance premiums for the year. How do we recover the employer’s contributions and what happens to the excess contributions we deducted from the employees?

Answer: If an employer deducted more CPP contributions and EI premiums than required and cannot refund the amounts, report the full amount of deductions on the employee’s T4. Employers that are entitled to a refund of CPP contributions or EI premiums must complete form PD24, “Application for a Refund of Overdeducted CPP Contributions or EI Premiums,” and send it to the Canada Revenue Agency.

As per section 38 of the Canada Pension Plan, employers must apply for a refund of CPP contributions within four years after the end of the year in which the overpayment occurred.

As per section 96 of the Employment Insurance Act, employers must apply for a refund of EI premiums within three years after the end of the year in which the overpayment occurred.

Where an employer is seeking to obtain a refund of Quebec Pension Plan contributions, employers should file a written request with Revenue Québec within four years after the end of the year in which the excess amount was paid.

The employee may request a refund on any overpayments when he files his tax return.

Question: What happens if employees lose their T4s and RL-1s after we have distributed them? Do we have to re-issue new ones?

Answer: If employees lose their copy of the T4 or RL-1, you may provide them with a photocopy. Clearly mark them as “duplicate.” Do not send the duplicate slips to the Canada Revenue Agency or Revenue Québec. For the RL-1, make sure the number appearing in the upper right-hand corner of the slip is legible on the photocopy.

Question: Our final pay period of the year overlaps into the next calendar year (December 21, 2005 to January 3, 2006). In what year should I report these earnings?

Answer: Although the last pay of 2005 reflects two taxation years, paycheques dated January 2006 must be reported on the 2006 T4 and RL-1. Reporting is required in the year in which the earnings were paid to the employee, regardless of when the employee earned the wages.

For more information, please contact the Carswell Payroll Hotline at 1-800-661-6828.

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