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We’re getting close to the end of the year which means a few things: Thanksgiving, Christmas, and in the case of employers, generating year-end tax forms, including the T4 slip, Statement of Remuneration Paid — the piece of paper most working Canadians need to file their taxes.
A T4 is a slip issued by employers to the Canada Revenue Agency (CRA) to detail how much employment income was paid and how much was deducted. This year has been unique — and the reporting requirements introduced by the CRA are no different.
Remuneration — what does it mean and what is included?
The dictionary definition of remuneration is money paid for work or a service. Every year, T4 slips are required for employees you’ve paid more than $500 OR have had to deduct Canada Pension Plan (CPP/QPP) contributions, Employment Insurance (EI) premiums, Provincial Parental Insurance Plan (PPIP) premiums or income tax from their pay.
T4s are filled out to report the following income types:
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 paid to employees during the year.
Taxable benefits or allowances.
Deductions 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).
How to report employment income during COVID-19 pay periods.
For the 2020 tax year, employers will need to comply with additional T4 reporting requirements to help the CRA validate payments made under the Canada Emergency Wage Subsidy (CEWS), the Canada Emergency Response Benefit (CERB), and the Canada Emergency Student Benefit (CESB).
All employers must report all employment income and retroactive payments made to employees in four defined periods in 2020 using information codes corresponding to the defined periods. The four defined periods are below:
- 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
For example, if you are reporting employment income for the period of April 25 to May 8, payable on May 14, use code 58.
When to issue T4 slips to your employees.
As an employer, you must report income on a T4 slip for the year it was paid — regardless of whether they are an active or terminated employee.
You must give employees their T4 slips by the last day of February following the calendar year to which the slips apply. If you don’t, you may face a penalty. The penalty for failing to distribute T4 slips to recipients is $25 per day for each such failure with a minimum penalty of $100 and a maximum of $2,500.
How to issue T4 slips to your employees.
Unless you have your employee’s permission to send their slips by mail, it’s best to issue their T4s electronically. Having a secured employee portal makes it really easy for you to distribute their tax information and for your employees to access it — a win-win! (As a small note, Wagepoint generates T4s and T4As at no additional cost. Employees can access these documents through the same online portal their paystubs are found.)
Dos and Don’ts for filling out T4 slips.
As you fill out T4 slips, follow these guidelines provided by the CRA:
Clearly fill out the slips.
Report all amounts you paid during the year in dollars and cents. The only exception would be pension adjustment amounts, which are reported in dollars only.
Report all amounts in Canadian dollars, even if they were paid in another currency.
Leave the box blank if you don’t have to enter an amount in a box.
Enter hyphens or dashes between numbers.
Enter the dollar sign ($).
Change the headings of any of the boxes.
Show negative dollar amounts on slips. If you need to make changes to previous years, send the CRA your amended slips for the years in question.
New year, new reporting requirements.
Given unique circumstances, the Canadian government has had to introduce different relief programs to support small businesses throughout the pandemic.
In response, the CRA has had to introduce unique T4 reporting requirements for 2020. These new requirements help validate any payments made under the CEWS, CERB and CESB.
As the year is coming to an end, employers are reminded that they are obligated to provide T4 slips to any employees they’ve paid in 2020. Failure to issue this slip may result in penalties.
The advice we share on our blog is intended to be informational. It does not replace the expertise of accredited business professionals. Wagepoint assumes no responsibility for errors or omissions in this document. To qualify for complimentary T4s, a business must run a minimum of two payrolls in the current calendar year.