The T4 is a tax form used to report employment income and deductions to the Canada Revenue Agency (CRA). Canadian businesses are required to file T4 forms annually for each employee who received salary, wages, tips, bonuses, or other remuneration during the tax year.
As a business operating in Canada, it is your legal requirement to file your T4s annually by the last day of February. Doing so helps to ensure that employees' income is accurately reported to the CRA for taxation purposes. It also provides your employees with the necessary information to file their own personal income taxes.
So you can see why the CRA takes T4 filing seriously - failure to file T4 forms correctly and on time can result in penalties and fines for businesses.
But despite being clear about your obligations for filing, the CRA is a little tricky when it comes to getting the actual filing done. You've got two ways to file - paper or electronic. However, the CRA states that if you have 5 or more employees, you have to file electronically. We always recommend the latter, regardless of your number of employees.
Electronic filing consists of two methods - Web Forms and Internet File Transfer (or XML). If you're using QuickBooks Online as your payroll software, then Internet File Transfer is quick, easy and painless! However, as with any filing, you want to double check every step of the way, and be 100% accurate with your payroll numbers.
How do you do this? Follow our 4 steps to filing below!
Step 1: Review, review, review
First things first, you need to get an overall snapshot of each employee's earnings and deductions for the year. You'll want to pull a report to gather this information using whatever software you use to run your payroll.
In QuickBooks Online, navigate to Reports > Payroll > Payroll Summary by Employee. Set your date range to last year, and ensure you select "All Employees". By default, QBO sets the Employee to Active Employees only. Lastly, choose to display columns by Employee.
Now is the time to look over your numbers and double check that all of your contributions are correct - and if not, make note.
Step 2: Compare your numbers to the T4 slips
If you are using software to run your T4's, we always recommend double checking before you file. You can compare the numbers on your T4 slips with those on your reports.
To access your T4 slips in QuickBooks Online, navigate to Taxes > Payroll Tax > T4 Employee Slips > Preview.
Ensure that the earnings and deductions match between the reports and the T4's. Review all of your boxes as they should populate as well. However, updates like these to your accounting software can come with bugs and errors, so the accuracy of these numbers should always be compared against your reports.
Note that as of January 2024, there are new T4/T4A boxes added for Canadian Dental Care Plan (CDCP). Check out Payworks’ article for more information on this new requirement.
You'll want to make sure that Box 14 - Employment Income includes all remuneration paid and all taxable benefits, such as allowances, AD&D and Life Insurance.
We cannot stress enough the importance of recording all taxable benefits. The CRA’s list includes, but is not limited to:
automobiles or other motor vehicles
board and lodging
gifts and awards
group term life insurance policies
interest-free or low-interest loans
meals
security options
tool reimbursement or allowance
transit passes
tuition fees
For more information, visit the CRA’s website.
Step 3: Tally Up Your Payroll Taxes and Compare with PD7A
Before filing, you should add up your payroll taxes for the year (Federal Income Tax, EI, and CPP, for example) and ensure that this matches what you filed and remitted via the PD7A.
To do this in QuickBooks Online, go ahead and run the Payroll Summary by Employee report and set your date range for last year. Again, select All Employees, as QuickBooks will default to only displaying Active Employees.
Rather than displaying columns by Employee, select your PD7A remittance schedule (semi-monthly, monthly, quarterly, etc.).
Take these numbers to your PD7A filings to make sure they match. Any discrepancies can result in penalties and fines from the CRA - surely not a great way to start the year!
Step 4: File Away!
In QuickBooks Online, you can export your T4s as XML files via the Payroll Tax module. The process is broken down into three filings - T4 Summary, T4 Employee Slips, and T4 Employer Slips.
Simply click File, and another module will open up where you can download the XML file that you will upload to the CRA. You will only have one XML file.
Next, navigate to the CRA’s filing module and select XML (or Internet File Transfer). You’ll need your business account number (usually ending in RP0001) and Web Access Code. If you don’t know your code, check out the CRA’s online resource for creating or retrieving your code.
Once you are logged in with your account number and code, follow the steps and prompts and be sure to print a confirmation (just in case!).
Conclusion
And there you have it! You’ve filed your T4s! If you’ve noticed any mistakes, don’t just export another XML and refile - you are able to amend or cancel filed T4s. Check out the CRA’s website for more information on this.
If the CRA has any questions about your return, you will either be contacted by a representative or receive a PIER review via the mail. No need to panic - it could be due to a small discrepancy, and doesn’t always result in a full blown audit.
If you need help or have any questions about filing T4s (and T4As) please reach out to us! We’d love to help you out.
If you've got questions about your T4s, we've got answers! Contact us today.