Our guide will help you guarantee that your company’s year-end payroll process is conducted smoothly and accurately so that you can start focusing on the new year ahead.
Gather up all the necessary forms and documents
A best practice for setting yourself for year-end success every year is to establish a year-end reference filing system at the start of each new calendar year for you and your team. If you’ve been keeping on track with staying organized all year, this step should be a cinch. If you need some guidance, start by downloading relevant employer’s guides and tax forms from the Canada Revenue Agency (CRA) website in order to produce T4s for your employees. Required and recommended forms include:
- Employers’ Guide – Payroll Deductions and Remittances (T4001)
- Employers’ Guide – Filing the T4 Slip and Summary Form (RC4120)
- Employers’ Guide – Taxable Benefits (T4130)
- Deducting Income Tax on Pension and Other Income, and Filing the T4A Slip and Summary Form (RC4157)
Be in the know about relevant changes
As federal policies are ever-changing, it’s important to stay up-to-date on all the latest news affecting business payroll and benefits, such as new rates for CPP and EI premiums, new rules for T4 slip deliveries, and new employment standards amendments. Review the updated versions of employer’s guides for changes affecting year-end filing along with all changes effective in the new year.
Meet with your internal stakeholders
As opposed to chasing down department heads the day before your filing deadlines, hold a preliminary year-end meeting with your HR, Finance, and other relevant departments to go over what information and assistance you will need from each of them to complete your company’s year-end. Insist on conducting the meeting in-person together so that there is more accountability on each individual stakeholder’s part. From there, maintain one-on-one communication with team members to ensure alignment and resolve any blockers so that everything runs on schedule and necessary adjustments can be made quickly.
Conduct checks and balances
Prior to administering and processing your company’s final pay run of the year, make sure that the following parts are checked and balanced:
- Review your employee details (for both current and former employees from the calendar year) to ensure all personal information is up-to-date. Make sure you have included and validated all of your employees' SIN numbers, as penalties will be incurred if incorrectly provided.
- Review any outstanding payroll entries, such as manual cheques and deposits, dated in the calendar year to ensure they have been included in the current taxation year. Ensure that all canceled payroll journals and canceled paycheques are not included in year-end figures. Additionally, consult with accounts payable to account for any personal expenses and other miscellaneous expenses reimbursed to employees.
- In accordance with your company policies, account for the accrual, carry over, or resetting of vacation time and personal/sick days allotted to employees.
- Identify any potential discrepancies with CPP contributions and EI premiums so that you can make any necessary corrections to the deduction data before the final pay run is administered. Refer to our guide to payroll deduction remittances for assistance with remitting payroll at year-end and year round.
- Ensure benefits paid out are recorded as taxable or non-taxable according to the CRA's benefits and allowances chart.
Once your last pay run of the year has been issued, you can enable a year-end reset on your payroll so that you can start afresh with your new payroll system come the new year.
Prepare for the issuing of T4 reports
Upon closing the year in payroll, you can begin the process of generating your employees’ T4 documents. Through your payroll software, you can activate a test run of your T4 reports to ensure all payment periods from the taxable year (from regular pay runs to any bonus pay runs) are included and to confirm that the proper earnings, deductions, and taxable benefits amounts are entered correctly on the tax forms.
By getting a head start on completing and distributing your T4 slips, you allow for an easy transition into the new year, as well as gain the appreciation of your employees for your foresight. Once all your T4 slips are done, process your T4SUM summary form, which reports the sum total of the amounts reported. Most payroll providers will automate this step for you.
Be proactive in preparing for next year’s year-end
After balancing your books and completing your year-end, conduct a post-mortem to prepare for next year-end, including action items such as:
- Creating an annual archive for restoring data or reporting purposes and including any updated documentation and helpful notes and reminders for improvement next year. Consider incorporating proactive habits such as balancing your payroll register every pay cycle throughout the year and requesting year-end balancing reports each quarter to ensure employee information and adjustments are updated accordingly.
- Reviewing your payroll calendar for potential payroll processing conflicts and modify your pay scheduling as necessary.
Ask for help from the experts
Payroll service providers are up-to-date on all the recent regulatory developments and can assist with navigating through the administrative challenges you encounter. However, providers face a big peak in support requests at year-end, so don’t wait until the filing deadlines are approaching to reach out - be sure to contact them early for the best service experience.