To help you navigate year-end, we share some helpful tips for acing the process like a pro. We start with breaking down the T4 slip and what you’re required to do to issue T4 documents to your current and past employees.
What is the T4 Slip?
The T4 slip is a document that lists how much an employee was paid and how much money was withheld on their behalf and remitted to the CRA. It simultaneously allows an employee to complete their tax return and allows the CRA to know how much money they received (and should have paid). In short, it offers a neat summary of the employee’s life at the company for the year, and makes sure that both the employee and the CRA are on the same page for when it comes to tax filing time.
What gets noted on a T4 slip?
In general, most taxable income, benefits, allowances, deductions, and pension plan contributions are all included, each placed in a neat little box for the CRA’s computers to analyze.
Do I have to issue T4s for all of my employees?
Typically all employees require a T4 slip. However, there are a few rare cases where you don’t have to issue a T4 on your employees’ behalfs. The rules state that if you pay an employee any amounts that are CPP/ QPP eligible or EI eligible, you are required to process a T4 slip on the employee’s behalf. If you have an employee or employees that do not have any pensionable or insurable earnings, you are only required to process in instances where they are paid over $500 in the year.
There are a few instances where you’d need to issue a T4 or T4A even if you didn’t pay the employee a penny. If you provide current employees with taxable group term life insurance benefits, you must issue a T4. If you provide this to former or retired employees, you must issue a T4A. And if you provide any current, former, or non-resident employee with security options, you must issue a T4.
What is the timeframe for the income reported on a T4 slip?
The income you report on a T4 slip is income for the year during which it was paid, and not for when the services were performed or rendered. So, if an employee works in late December and the payment is made in early January, that income needs to be reported on the T4 for the subsequent year. This is especially important to remember because if you need to make any pay corrections, it is best to make them before the start of the next year. Your deadline is quite literally a minute before New Year’s Day. So, if there are bonuses owing, make sure they get paid out in December!
Want more information and guidance on conquering year-end without a hitch? Download our free ebook, The Year-End Guide for Canadian Payroll Pros.