Year End Payroll Checklist Canada: CRA Compliance Guide

When to Start Year End Payroll Preparation

Reconciling means that you will be comparing your payroll records against what has been reported to CRA. You will be checking that the Canada Pension Plan (CPP), Employment Insurance (EI) and income tax amounts deducted from employees’ pay have been remitted to CRA for the year.

Compare your payroll summary and compare it against your CRA payroll account statement right away. If there is a discrepancy you will have to change remittances or change earlier payroll entries. This is a crucial step on your year end payroll checklist; mistakes can result in notices or result in fines.

Reconcile CRA Payroll Accounts

Reconciling means that you will be comparing your payroll records against what has been reported to CRA. You will be checking that the Canada Pension Plan (CPP), Employment Insurance (EI) and income tax amounts deducted from employees’ pay have been remitted to CRA for the year.

Compare your payroll summary and compare it against your CRA payroll account statement right away. If there is a discrepancy you will have to change remittances or change earlier payroll entries. This is a crucial step on your year end payroll checklist; mistakes can result in notices or result in fines.

Verify Employee Information

It is very important to make sure that employee information is accurate. You also have to make sure that each employee’s Social Insurance Number (SIN) is correct. A single wrong number will cause T4s to get rejected by the CRA.

Make sure the employee’s legal name matches the name in government records. If necessary, make any changes to employees’ addresses before issuing T4s to ensure that the T4s will be delivered to the correct address. Having the proper records is part of your year-end payroll checklist and the protection of both employee and employer.

Review Taxable Benefits

Employers are required to review all of the taxable benefits provided by the employer to the employee during the year. Taxable benefits can include automobile benefits, bonuses, gifts and the employer paying the employee’s premium for insurance. Taxable benefits must be considered in calculating the income of the employees.
 

Remote employee allowances and other unique payments should also be reviewed to see if they qualify to be taxed and must be included in T4 reporting. If taxable benefits have been missed by the employer, the employee will have a tax issue at a later date. By completing the review of tax benefits, the employer can ensure that the payroll is clean and compliant.
 

Process Final Payroll of the Year

When you process the year end payroll processing checklist, it is very critical that all of your regular wages, plus any other payments earned up to December 31st are paid out and accounted for. Review everything to ensure accuracy.
 

1) Bonuses

All year-end bonuses must be subject to appropriate tax deductions for CPP, EI, and Income Tax. Bonuses must be reported as part of the Employee’s T4 slip as Employment Income earned during the calendar year.
 

2) Terminations

Employers must also verify that they have correctly filed with the province for employees’ final pay, vacation, and benefits. They must also have issued the record of employment (ROE) correctly.
 

3) Accrual adjustments

Make sure you are reviewing payroll accruals. This must be done to ensure the amount of wages or benefits owed to employees matches the actual amount paid to employees during the calendar year.
 

Prepare & File T4 and T4A Slips

T-4 and T-4A summary slips report the total of employees’ year-end earnings as well as the id. numbers and total deductions for those employees. Both forms of T4 and T-4A must be filed accurately and on time. Failure to file on time will result in penalties.

1) T4 summary

The total T4 will indicate the gross total of an employee’s annual wage and deductions (for all employees in one T4 and T4A) paid by that employer. The total will need to match the employer’s payroll records and CRA remittances.
 

2) Electronic filing

The majority of employers must file electronically with CRA. Filing online is quicker than filing by using paper forms and reduces errors.

1) CRA penalties

Employers may incur penalties if they file T4 and T4A slips late or incorrectly. Penalties are determined by the number of T4 and T4A slips filed late or incorrectly. Therefore timely filing of T4 and T4A eliminates additional cost and/or non-compliance issues.

Common Year End Payroll Mistakes

Employers experience many small errors during the year end payroll process. Reviewing commonly made errors can help you identify them before they occur.

1) Missed benefits

Failing to include taxable benefits, such as car allowances or insurance premiums, can result in incorrectly recorded T4 slips and/or incorrect future corrections to verification records (CRA).
 

2) Late filing
 

After missing the February T4 filing deadline, penalties will be assessed. Always certify your T4 forms and submit them on time (before deadline).

You can:

3) Incorrect remittances

CRA may send out a notice if the payroll remittance does not match the amount that was reported. The normal reconciliation process can reduce the chance of this happening.

Quick Payroll Checklist

Conclusion

An effective year-end payroll checklist will help ensure that you are complying with your obligations and making fewer mistakes (like being subject to a penalty from the Canada Revenue Agency). To achieve a smooth year-end payroll closure process, you must start early with following the year end checklist for payroll. You must also complete multiple steps such as reconciliation of your numbers, confirming the accuracy of all employees’ information, and ensuring proper benefits packages are in place for employees.

Orbit Accountants has extensive experience in the payroll compliance requirements of Canada. We have assisted thousands of clients in accurately completing CRA reporting, remittances and year-end filings – all completed timely throughout the years. Ensuring that your payroll process meets all payroll compliance requirements allows you to focus on growing your company with the confidence of knowing that your payroll is in compliance with government regulations.

So if you are looking for payroll related assistance, then Orbit Accountants has your back. Book a free consultation today.
 

Disclaimer: This article is provided for general informational purposes only and does not constitute tax, legal, or accounting advice. Sales tax obligations may vary depending on your province, industry, and business structure. Businesses should consult a qualified professional for advice specific to their circumstances.
 

Frequently Asked Questions

What is included in a payroll year end checklist in Canada?

A year end payroll checklist for Canada includes reconciling CRA accounts, verifying employee information, checking for taxable benefits, ensuring CPP and EI have been calculated to limits and completing the final payroll reports (including T4 & T4A Slips).
 

When are T4 slips due?

T4 slips must be provided to employees and filed with the CRA on or before the last day of February in the year after reporting. If you file them late, you will incur a penalty from the CRA.

How do I reconcile payroll with CRA?

You must compare your payroll records for CPP/EI/Income tax to your CRA Payroll Account Statement. You must make sure they match prior to submitting T4 summary documents to CRA.

What are the penalties for late T4 filing?

A late penalty is assessed based on the number of T4 slips filed after the due date. Penalties will increase with time and number of slips so it is strongly advised that T4 slips are filed on time!