Unit 12: Year end reporting Flashcards
does year end happen at year end? Explain
no, it is a year long process. starts at the beginning of the year as the first payroll is being processed.
what are the following steps if done each month will help to ensure a smooth year end?
- make sure source deductions remitted are the same that shows on your payroll records and in the GL including employer portion
- any taxable benefits not entered on a per pay basis have been entered into the payroll records.
- all manual cheques issued to employees have been included in year to date totals
- all cancelled cheqs or recalled deposits have been removed from year to date totals
- all payroll records show a valid sin for each employee
- payroll records reflect a correct and current address for each employee
before completing your slips and sending them to employees and cra, what should you do
a full audit of your T4 information
If you do a full audit of your t4 information what will this do?
decrease the likelihood of receiving a PIER report from CRA later in the year.
What are some standard items to audit (T4 SLIP)
- make sure no employee has contributed more then the yearly maximums for CPP or EI (or not more than they should’ve)
- Group life insurance goes in box 40 of T4 and included in employee’s earnings in Box 14
- box 26 (CPP pensionable earnings) usually the same as box 14 (but not always, ie turned 70)
- box 24 insurable earnings - make sure it is not higher than it should be
- your business number is shown on all copies of the T4 except for the employee’s copy
If the employee contributes more than the yearly maximums for CPP and EI based on their earnings and exemption amounts, what will happen
they will be refunded by CRA
if you over submit CPP and EI to CRA what can you do?
you can apply for a refund by submitting a PD24 and submitting it with your T4s
- if you file electronically you will have to submit your PD24 separately
If there is an overpayment for CPP or EI do you adjust the T4?
no never
what are some reasons why the box 26 CPP pensionable earnings will be different than box 14
- employee turned 18 or stop contributing to CPP
2. receiving a disability pension
where does your business number not go
on employee’s copy of the T4
what information do you need from CRA to complete your T4s
- T4 slips and summaries
- T4A slips and summaries
- employer’s guide to filling the T4 slipand Summary form (RC4120)
- employer’s guide to Payroll deductions - basic info (T4001)
- Employer’s guide to payroll deductions - taxable benefits (T4130)
- quebec has their own guides
What are some good guidelines for completing the T4 slips
- complete it clearly and sort in alphabetical order by last name if doing manually
- separate t4 slip must be completed for earnings and deductions for each province in which the employee was employed during the year (province goes in box 10)
- report : salary wages, taxable benefits, allowances, and other taxable amounts paid as well as pension adjustment amounts
- must be reported in Canadian dollars and cents. no negative amounts can be reported or shown
- SIN entered on T4 for each employee must be correct and valid
- do not write Nil in any boxes
- if you have more than one business number there may be times when an employee has moved part way trough the year from one business number to the other. make sure both add up to the correct amount (do up two)
- make sure the correct pension adjustment is on the correct T4
why is the SIN important?>
it tracks CPP and EI amoutns for the employee which could impact future pension or insurance benefits.
What happens if an incorrect or no SIN number is provided and the employee has RRSP/RSp dedcutions?
it will impact the employee’s RRSP deduction limit which is reported on their tax assessment.
if you do not report the correct SIN or no SIN on T4 can you be charged?
you can receive a fine of $100 if you cannot prove you have made appropriate effort to get a SIN from an employee.
If you do not have a valid sin, what do you do?
complete the box with 9 zeros
can you write Nil if the boxes have nothing to report or put zeros in?
no, just leave blank
How many T4 copies are completed?
4
What colour of ink can you complete the T4s in?
blue or black
What is copy 1 for
the employer to submit to CRA (by feb 28 or 29th or the next business day if th elast day of feb falls on a Saturday or sunday
what is copies 2 and 3 for
given to employee also by the last day of feb (two slips on one piece of paper)
What does the employee do with their copies of the T4
one is kept and one is attached to their income tax return
- if they file electronically, they keep both copies and CRA may request to see them
What is copy 4 of the T4 for?
copy 4 stays with the employer in case they are audited by CRA
the employer should do what in case the employee loses their copies?
the employer should keep copies of the employee’s copies
- If you have to give the employee another copy you should mark DUPLICATE on both portions
when must the T4s be filed with CRA in Ottawa by?
the last day of Feb for the previous tax year
What is a T4 summary
it is a summary of all the T4s you handed out to employees for the year - this is for non-electronic filing
- it is filed with the T4 slips
What is a T4A slip
used to report other types of income that are not reported on the T4.
what are some examples that goes on a T4A slip
such as,
payments/ earnings like a
1. lump-sum payments,
2. commission paid to a self-employed agent,
3. patronage allocations and
4. life insurance paid by the employer to retired employees
boxes on the T4A slip
are similar to the T4 slip
What is CRA’s preference for employers to file their T4 and T4As?
electronically
if you have more than 50 slips, how must you file?
electronically
What are the different ways for filing your T4s electronically?
- web forms
- internet file transfers
- CD/DVD’s
Explain filing your t4s using web forms
for employers with less than 100 T4 slips
- done by the internet
Explain filing your t4s using internet file transfers
using your payroll software you can create what is called an XML file and transfer this file to CRA via the internet
Explain filing your T4s using Cd/Dvd’s
you can still create a CD with the XMl file copied and send it to CRA although the rather you use the internet
If there is an error on the T4 how do you amend or cancel a slip?
two ways
- send a paper copy of the amended T4 / T4A along with a letter of explanation to CRA or
- create a new XML file and use the CRA’s website to resubmit the amended T4/T4A. only change the information on the slip that needs correcting
What does PIER Report stand for?
Pensionable and Insurable Earnings review
What happens once CRA has received your T4/T4a SLIPS?
they start an audit process.
What does CRA’s audit process include/ identify?
any deficiencies of CPP contributions or EI premiums
they perform a series of calculations on each T4 to see if they meet the requirements to pass
when do employers who are to receive a PIER receive it?
usually several months after they submitted the T4/ T4As
What is the calculations used for PIER - CPP deficiencies
CPP pensionable earnings shown on T4 - CPP basic exemption for the year x applicable CPP rate for the year = CPP contribution to annual maximum
What is the calculation used for PIER - EI deficiencies
EI insurable earnings on T4 slip
x Applicable EI rate for the year = EI premiums annual max.
When an employer receives a PIER report what does it show
the employee’s name and reason the CRA is questioning it.
When an employer receives a PIER Report what must they do?
must respond back to CRA explaining why the CPP or EI deducted was different than what CRA believes to be correct
If the employer receives a PEIR Report and shown that the employer did make a mistake what happens
pay both the employee and employer portions of CPP or EI or both
What is another two things that payroll must remember to complete on a yearly basis
EHT and WSIB reporting
