You took the plunge last year and hired your first employee. You’ve been diligent in getting his paycheques out and ensuring the monthly payroll remittance was paid on time. Now we’re into a new calendar year, so what’s next? You have to file the T4s for your company based on what you paid the employee last year.
Generally, you need to complete a T4 slip if you are an employer and you paid your employees’ employment income, commissions, taxable allowances and benefits, fishing income, or any other remuneration. If you had someone do some odd jobs for you and it was less than $500 for the year, then you won’t have to file a T4.
Guidelines for completing T4 slips
- Complete the slips clearly.
- Report, in dollars and cents, all amounts you paid during the year, except pension adjustment amounts, which are reported in dollars only.
- Report all amounts in Canadian dollars, even if they were paid in another currency.
- Do not enter hyphens or dashes between numbers or names.
- Do not enter the dollar sign ($).
- Do not show negative dollar amounts on slips; to make changes to previous years, send us amended slips for the years in question.
- If you do not have to enter an amount in a box, do not enter “nil” – leave the box blank.
- Do not change the headings of any of the boxes.
Distributing T4s to Employees
You must give employees their T4 slips on or before the last day of February following the calendar year to which the slips apply. If you do not, you may be subject to 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.
Give the employee one of the following:
- Two copies, sent by mail to their last known address;
- Two copies, delivered in person; or
- One copy distributed electronically (for example, by email) if you have received the employee’s consent in writing or electronic format.
I suggest that you print the two T4 slips that you have to give to each employee on one sheet. For security purposes, do not print your payroll account number (box 54) on these copies. If T4 slips are returned as undeliverable, I suggest that you retain the slips with the employee’s file.
You also have to file a T4 Summary, even if it’s only one slip. The Summary states the total employment income, Canada Pension Plan (employee & employer), Employment Insurance (employee & employer) and income tax deducted from the employee during the calendar year.
You also state what you remitted during the year to Canada Revenue Agency. If there is a difference between what you remitted and what the actual deductions were, then you must pay the balance owing when you file the T4 and summary. You will more than likely get a penalty and interest for not filing during the year properly.
How do I file with Canada Revenue Agency?
Canada Revenue Agency does prefer you to file your T4 and summary electronically. If you have over 50 slips then you must file electronically.
Sage 50 and QuickBooks allow you to file via their software; however, you must be on the latest version and subscribed to their payroll updates. This is the best way if you have more 5 employees. Your bookkeeper or accountant can also help with filing your T4s.
If you’re using a payroll service, such as Ceridian or ADP then they’ll file them for you.
If you just have a few slips then you can use CRA’s Web Forms service. I wouldn’t do more than 5 using this feature, as it can be pretty tedious.
Once the year is done you now have to give your employee his/her T4 and then file the same with CRA. It’s always a good idea to get this done as soon as you can after the calendar year ends; though not too soon in case there are adjustments you need to make for taxable benefits and such.