Every tax year, employers in Canada who have paid out remunerations to employees throughout the year are required to fill out and issue T4 slips to their employees. For the 2020 tax year the deadline for filing your T4 information return to the CRA and issuing T4 slips to employees is Feb 28, 2021.
This guide will cover the noteworthy items involved to ensure a smooth T4 reporting and filing process this year.
Humi Payroll simplifies the process by preparing the T4 slips automatically based on your payroll records from the tax year. However, it is strongly recommended that employers first understand the implications of T4 reporting. In general the process involves thoroughly reviewing the prepared T4 slips for all employees before issuing, while being mindful of the T4 issuance deadline, as penalties may be incurred for inaccurate reporting or for late filing.
Types of income to report on T4 slips
Most amounts paid to an individual by an employer are referred to as remuneration. The T4 slips cover these types of remunerations:
- Salary, wages (including pay in lieu of termination notice), tips or gratuities, bonuses, vacation pay, employment commissions, gross and insurable earnings of self-employed fishers, and all other remuneration (see Box 14 – Employment income, for a detailed list) you paid to employees during the year
- Taxable benefits or allowances
- Retiring allowances
- Deductions you withheld during the year
- Pension adjustment (PA) amounts for employees who accrued a benefit for the year under your registered pension plan (RPP) or deferred profit sharing plan (DPSP)
Generally compensations like salary and wages, as well as additional income types like bonus, tips and vacation pay processed through Humi Payroll are automatically assigned to the corresponding boxes on the T4 slip.
Verify benefits are reported in all required boxes on tax slips
In some cases taxable allowances and benefits may have additional T4 reporting requirements. For example, in addition to reporting a housing allowance in Box 14 as employment income, it also needs to be reported again in the T4 slip's "Other Information" section with code 30.
It is important to ensure all benefits are reported correctly in the T4 slips by specifying the T4 code that the benefit should be reported in. Review existing benefits to verify that each applicable benefit has had a T4 box specified. Learn more about setting up benefits.
For the list of benefit codes, refer to the CRA's Benefits Reference Chart.
*Note that Box 14, 16-18, 22, 24, and 26 are automatically assigned by Humi Payroll
Verify YTD records are accurate
Employers who started using Humi Payroll mid-year generally go through the process of uploading the Year-To-Date (YTD) payroll records. When T4 slips are prepared, these records help provide a full year's context on payroll processed, in addition to the live payrolls processed through Humi Payroll.
It is important to review, and update the records if necessary, to ensure they accurately represent payrolls processed through previous payroll providers. Learn more about updating payroll YTD records. In addition, confirm with your previous payroll provider whether they have filed T4s throughout the year, as double filing T4s may overstate actual earnings and may require reconciliation.
For Employer CPP amounts, Humi Payroll generally assumes a 1:1 ratio with Employee CPP amounts. For Employer EI amounts, Humi Payroll generally assumes a 1:1.4 ratio with Employee EI amounts unless you have reached out throughout the year to request for a custom ratio to be applied.
New T4 reporting requirements
In August 2020, the CRA introduced additional T4 reporting requirements for the tax year. Employers are required to separately report each employee's employment income in the following periods in the Other Information section:
- Code 57: Employment income – March 15 to May 9
- Code 58: Employment income – May 10 to July 4
- Code 59: Employment income – July 5 to August 29
- Code 60: Employment income – August 30 to September 26
If you were a Humi Payroll customer before March 15, 2020, the amounts will have been pre-filled on your behalf. Verify the amounts are consistent with the payroll amounts processed throughout the periods when you review the prepared T4 slips in-app.
If you were not with Humi Payroll during the March 15 - September 26 period, you may still go through an in-app process to retroactively enter the employment income information, which will be covered in the next section of the guide.
Prepare and Review tax package
After you have confirmed your employee data and payroll data are accurate and up-to-date, it is time to generate the tax package through Humi Payroll.
Humi Payroll provides three types of tax information for review and filing needs:
T4 slips are summaries of employment earnings and deductions for the year for individual employees. Humi will produce T4s for active and terminated employees, as long as the employees have been paid through Humi Payroll in the past.
T4 Summary contains the totals of the amounts reported on the related T4 slips. A basic breakdown can be viewed directly in Humi alongside the more detailed version available in your download package.
T619, is an electronic transmittal record of T4 and T4 Summary. This is to be downloaded and filed with CRA. In addition, the T619 can also be downloaded and viewed as a text file.
Some boxes in the T4 Summary have been intentionally left blank to ensure the most accurate and relevant information is available to you.
Verify statutory deduction amounts
Typically after the T4 slips and T4 Summaries are filed, the CRA reviews the records submitted to make sure the pensionable and insurable earnings reported would correspond to the deductions that are withheld and remitted. If there is a difference between the CPP contributions or EI premiums required and those you reported, the CRA will provide a Pensionable and Insurable Earnings Review (PIER) listing showing the names of the affected employees and any balance due.
To help employers catch potential discrepancies early and to avoid late remittances, Humi Payroll performs a preliminary PIER analysis for each employee's T4 slip, which is available when you preview the T4 document in-app.
PIER results provided in the T4 feature is provided for reference based on Humi's calculations, and will not prevent you from issuing any T4 slips as is. The final verdict on any under- or over- remitted amounts should be based on the PIER listing provided by the CRA.
However, it is recommended that payroll admins take a conservative approach to reviewing Humi Payroll's PIER analysis for each employee, and if applicable remit the difference through CRA website as soon as possible. Learn more about correcting remittance errors.
After remitting the difference, be sure to update the T4 slips in Humi Payroll to reflect the latest deduction amounts, before issuing the documents to employees.