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Year-End Planning Best Practices Checklist

by Kimberly Fiume | on Oct 01, 2011 | No Comments

The following updated and enhanced checklist is provided to help you effectively manage the year-end process.  Also remember to visit the various government web sites regularly to ensure you have the most up-to-date information available.

Download all the updated tax forms from the CRA, www.cra.gc.ca and QRA  www.revenu.gouv.qc.ca/eng/ministere/index.asp web sites. Many forms are also available in fillable format PDF versions. For fillable Quebec forms the format is “Dynamic PDF”.

Download updated employer’s guides from government web sites. Review guides for changes affecting year-end along with changes affecting new-year practices.

You must file returns by electronic media in XML format if filing more than 50 information slips (T4/T4A/RL-1/2). Although a paper T4/T4A Summary is not necessary when filing by electronic media with CRA, Quebec employers must still file an RL-1/2 Summary with QRA regardless of the number of slips filed.

For efficiency, Consider filing information slips using the electronic methods available from CRA and QRA rather than submitting paper returns when you have to file 50 or less slips. Visit http://www.cra-arc.gc.ca/esrvc-srvce/rf/menu-eng.html and http://www.revenuquebec.ca/en/sepf/services/info/entreprise/entreprises.aspx.

Obtain approval from CRA and/or QRA if creating laser versions of T4/T4A/RL-1/2 slips. Instructions located at: www.cra.gc.ca/customized and http://www.revenuquebec.ca/documents/en/publications/ed/ed-425-v(2010-12).pdf.

Gather updates and attend training events offered by payroll service providers, software providers, consulting organizations and/or associations.

Review the last pay periods of the current year and the first pay periods of the next year to ensure all payments with the pay date for the current year are included in current year T4s, T4As and RL-1/2s, as applicable. Cheques/deposits dated in the new-year are reported in that taxation year.

Review any manual cheques dated in current year to ensure they have been included in current year-end figures (also remember to check with accounts payable).

Review all cancelled payroll journals and cancelled pay cheques to ensure they are not included in current year-end figures (keep a separate file for year-end balancing).

Verify that taxable benefits have been correctly calculated and included in taxable, pensionable and insurable income, as applicable (check with accounts payable for any personal expenses reimbursed to employees).

Québec only: Ensure employer-paid premiums for Health and Dental premiums and Accidental Death and Dismemberment (AD&D) are reported as a provincial taxable benefit on the RL-1 slip.

Review T4/T4A/RL-1/2s to ensure no negative amounts.  Negative amounts indicate current year’s taxable income has been incorrectly stated. (Corrections to previous year’s slips may be necessary. )

Review each information return for employees who have been paid in other currencies to ensure all amounts reported have been converted to Canadian dollars.

Review earnings and statutory deductions for each employee who transferred provinces during the current year. Ensure a separate information slip is issued for each province of employment.

Review earnings and statutory deductions for each employee who transferred between payroll deductions accounts (different RP accounts) or different legal entities (different Payroll Account Numbers) to ensure a separate slip is issued for each RP and or BN account under which an employee had earnings.

If you have a reduced EI premium rate account and a regular EI premium account, ensure you have two T4 slips for employees who transferred between the two RP payroll deductions accounts. Part-time employees who transfer to permanent full-time would have two T4 slips in this situation.

Ensure an RL-1 has been issued to each employee with taxable income subject to Québec source deductions. Ensure the federal portion of income tax is reported on the T4 and not on the RL-1 slip.

Review all employee year-to-date earnings and statutory deductions to ensure a T4 or T4A has been issued where required by the “de minimis” rules. There are no de minimis rules for Quebec.

Effective with the 2010 tax year, retiring allowances are reported on the T4 slip using code 66 for eligible amounts and code 67 for non-eligible amounts.  The codes for Status Indian employees are 68 for eligible and 69 for non-eligible. There is no change to reporting of retiring allowance for the Quebec employee. The amount remains on the RL-1 slip in box “O” along with footnote code RJ.

Balance source deduction remittances made for the current taxation year to:

  • PD7A/TPZ-1015.R remittance statements
  • Payroll register YTD totals
  • T4/T4A/RL-1 run totals

Review employee C/QPP basic exemption and contribution amounts for the year (your own, preliminary PIER audit report).

  • Ensure that Box 26 of the T4 is completed at all times even if the pensionable earnings are zero. If at maximum pensionable earnings Box 26 should have 48,300.00 entered.
  • Ensure that Box 24 of the T4 is completed at all times even if the insurable earnings are zero.  If at maximum insurable earnings Box 24 should have 44,200.00 entered.

Ensure Box G of the RL-1 slip is completed even if pensionable earnings are zero.

Balance EI insurable earnings to EI premiums (again, using your own PIER audit report). Insurable earnings should not be reported on the RL-1, however EI premiums withheld are reported on the RL-1.

Balance Quebec Parental Insurance Plan (QPIP) insurable earnings to QPIP premiums. Both premiums and earnings are reported on the Quebec T4 and RL-1 slips.

Ensure employer RRSP contributions are not reported in Box 20 of the T4 or Box D of the
RL-1.

Employer contributions to employee’s RRSP’s are considered a taxable benefit and are reported on the T4/RL-1 slip in boxes 14/40 and A/L. Employee contributions to RRSP’s are not reported on a T4 or RL-1 slip – financial institutions issue receipts to the employees.

Ensure that a pension adjustment (PA) is correctly calculated and reported in Box 52 of the T4. PA’s are not reported on RL-1 slip. PA’s are reported for employees who belong to Registered Pension Plans (RPPs) or Deferred Profit Sharing Plans (DPSPs) not Registered Retirement Savings Plans (RRSPs). Box 50 is for the registration number of the plan.

Review any terminations in the year to ensure a T10 is completed for all terminations where Pension Adjustment Reversal (PAR) reporting is required. Alternatively check with your pension plan administrator.

Review each T4/T4A/RL-1 to ensure a valid SIN number appears on each slip.  Do not enter fictitious numbers if you do not have a SIN, instead enter all zeros.

Ensure all applicable footnote codes are reported where necessary.

For paper returns, ensure a T4/T4A summary is prepared for each separate CRA Payroll Account Number/RP Payroll deductions account. Regardless of whether your file paper or electronic returns, you must prepare an RL-1 summary for each Québec payroll deductions account number (RS).

The due date for annual information returns (T4/T4A/RL-1/2) is the end of February for the previous taxation year. Late filing may result in a penalty and interest charges.

Final statutory remittances for the tax year are due before you file your annual returns. Sending payment/s with the annual return/s, with the exception of the Quebec – Commission des normes du travail levy and the training tax, is considered a late remittance.

Tips for completing information slips:

  • Complete slips clearly and in alphabetical order.
  • Report all amounts in Canadian dollars and cents with the exception of Pension Adjustments which are reported in whole dollars.
  • If you have to convert US dollars to Canadian dollars, use the Bank of Canada’s http://www.bankofcanada.ca/en/rates/exchange-avg.html web site to convert the currency.
  • Do not enter any dashes, hyphens or dollar signs.
  • If there is no amount or code to report in a box leave it blank, do not zero fill or enter the word “Nil”.
  • Do not change the headings of any boxes.

Complete a slip for any individual that received remuneration during the year if:

  • You had to deduct C/QPP contributions, EI/QPIP premiums or income taxes; or
  • The amount of remuneration is more than $500.

Regardless of the amount earnings, if you provide group term life insurance benefits you must prepare a slip, this is also true for retirees as well, except that for retirees the amount is reported on a T4A slip.

You can file amendments/changes or cancellation of information slips electronically.

Remember, each payroll can be unique — be sure to add your own reminders to ensure your year-end reporting is completed accurately and on time.

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