Tax season is fast approaching in Canada and T4s will be due shortly. For small business owners and employees alike, tax planning is an important part of the year. It is officially time to close out the payroll year and in order for it to go smoothly, you must be aware of the things to do before submitting T4s.
There are several important items to handle, and having a checklist to ensure that everything is taken care of before submitting T4s can be very helpful in reducing errors. The T4 tax form, also known as the Statement of Remuneration Paid, is the tax document that employees need to file their taxes.
The T4 renders a summary of the monies earned by an employee throughout the previous payroll year, and how much was paid to the Canada Revenue Agency (CRA). T4s must be filed on or before the last day of February. However, if this date falls on a weekend or a holiday, the due date will become the next business day.
In this article, we will review 5 things to do before submitting T4s.
1) Verify Employee Information
As a small business owner, you must confirm that you have all the correct information for your employees and subcontractors. Details such as their name, address, and Social Insurance Number (SIN) must be accurate. If these are found to be incorrect, the CRA will continue to process the forms. However, it could affect the employee’s Pension Plan and needs to be fixed before the upcoming year. Furthermore, if you have made considerable efforts to obtain the SIN but have been unsuccessful, you must document this in the employee’s file.
2) Ensure That T4 Summaries Match
A T4 summary represents all of the information reported on the total T4 slips that you have prepared for each of your employees for the year, including the insurable earnings, income tax, and contributions to the Canada Pension Plan (CPP) and Employment Insurance (EI). It is imperative that the totals reported on the T4 Summary equal the totals that will be found on your T4 slips. If there are any disparities between the two, this could result in delayed processing times for the tax forms.
3) Follow CRA Guidelines
The Canada Revenue Agency is very detailed in its rules and regulations, and as a small business owner, you must follow these instructions carefully for things to do before submitting T4s. When filling out your T4 slips, you must look out for the following:
If your employee worked in more than one territory or province during the year, a T4 slip must be filled out for each territory or province.
If you have multiple payroll accounts, a T4 return must be filed for each payroll account.
Do not show negative dollar amounts on slips.
Do not enter dashes or hyphens between numbers.
Do not enter the dollar ($) sign.
All amounts you paid during the year must be reported in dollars and cents, with the exception of pension adjustment amounts, which should be reported in dollars only.
If a box does not have a value, leave the box blank. Do not enter N/A or “nil”.
4) Fix Any Mistakes
It goes without saying that as a small business owner, you must triple check your tax forms before submitting them. Excluding the error of having the wrong address for an employee, anything else that is inputted incorrectly on a T4 slip will require an amended slip to rectify the information. You may amend a T4 electronically or via paper. It is important to note that the CRA could contact you regarding the reasons why the returns were amended or canceled.
5) Make Copies
If you are filing your T4 on paper, make sure that you have copies of everything that you have filled out and will be sending to the CRA. If you are filing electronically, you may do so via the CRA’s free Web Form. Ensure that you have physical copies of what you filled out online as well for your own records.
To Sum Up
It is safe to say that tax season can never be considered as fun. However, if you maintain a checklist and use the tips found here, tax season will be a more smooth experience for you as a small business owner, and even for your employees. Ending the payroll year does not have to be an exhausting period if you keep certain things in mind.
The things to do before submitting your T4s are crucial to avoiding delayed processing times or even having the CRA contact you regarding any discrepancies found on your T4 slips and/or T4 summaries, whose totals must match at all times.
Additionally, if there is an error on an employee’s T4 slip, you are required to let them know so that they do not submit the incorrect T4. Accuracy and double checking your slips and summaries will go a long way in this tax season.
Filing your T4s is an important part of keeping your Canadian small business tax compliant. Reach out to us if you are struggling to get these done this year or need a little extra guidance.