Whether you’re going through the year-end process for the first time or not, it’s important to know and understand the numerous tasks at hand to ensure a smooth year-end. Staying calm in the face of year-end is possible! Preparation is key.
Demystifying the year-end
Year-end in payroll is generally a busy and stressful period for entrepreneurs. You’re required to prepare countless documents to close the current calendar year, as well as meet governmental requirements.
As part of the administrative and legal process, you must verify and transmit to the governments the data pertaining to all wages paid to your employees, and determine the frequency of source deduction remittance for the upcoming year. You must also prepare certain documents and transmit them to your employees so they can file their income tax return.
During the year-end period, you’re not only required to close the current payroll year, but you must also be prepared for the next one, which is only a few weeks away. In this respect, planning around the different government deadlines and verifying that your source deduction calculations are accurate is in your best interest. An error can bring you its share of unpleasant surprises, such as penalties.
If you would like to head into year-end as calmly as possible, we suggest that you follow certain recommendations that can help you better understand your obligations, to end the year in style.
Producing income tax slips
Year-end in payroll is synonymous with income tax slips. Indeed, you’re required to produce and remit employee T4s and T4As by the last day of February. There are several distribution options, however, online remittance has been gradually replacing conventional methods. Giving online tax slip access is practical for both you and your employees, as a digital version of these documents is always readily available.
It’s important to ensure tax slip data accuracy, as errors could incur fees, such as government penalties. Don’t underestimate the importance of keeping your employee files up to date!
Additionally, you must transmit your documents to the government. Note that these tasks could be greatly simplified by availing yourself of the services of a payroll provider. They can take over certain responsibilities, such as the production and transmission of employee tax slips, as well as data and federal summary transmission to the Canada Revenue Agency (CRA).
In certain cases, your payroll provider allows you to delay income tax slip production to give you more time to adjust or transmit data. Don’t forget to authorize tax slip production by February 12 at the latest, so that they can be produced and transmitted by the deadline.
We recommend that you download the CRA’s Income Tax Package regarding the filing and submitting of your T4s and federal summary. We send our clients year-end bulletins, and they can refer to our online guides in the User Help.
Validating your payroll processing schedule
It’s important to validate, before the end of the current year, if your payroll schedule has the correct number of pay periods for the upcoming year. You must also confirm the payroll processing and payable dates for the last payroll of the current year and the first payroll of the upcoming year. This step ensures that you’ve planned adequately for the two most important payrolls of the year-end period. Furthermore, please respect the processing deadline for the last payroll of the year. If you’re late, your payable date could end up going into the following year.
Make sure to verify that the payroll processing dates for the upcoming year don’t conflict with the statutory holidays, in which case you’ll have to make the necessary modifications.
It’s also time to modify and validate the contribution rates for in-house deductions such as pension plans, unions, etc.
Verifying your remittance frequency
The remittance frequency is determined by the different government levels (federal and provincial). It’s normally updated in the months of November and December, during the year-end period, to come into effect in the new year. If you don’t know what the remittance frequency is or don’t receive any information in this regard, we invite you to contact the government.
At the federal level, there are four remittance frequencies that are determined based on the remitter type. We recommend that you refer to the CRA’s website.
Note that only the government can authorize a new remittance frequency. If you have a payroll provider and your frequency has changed, you must inform them and provide the official government notice.
Staying up to date
Among the numerous tasks to accomplish, some of them may be of an administrative nature and seem mundane, but they’re important nonetheless. You can start by verifying that your business and employee information is up to date because, in reality, this legal information is of utmost importance.
For example, we recommend that you ensure that all your employees have a valid social insurance number (SIN). This information is mandatory. In the same vein, verify that their personal information is still accurate: home address, telephone number, etc. This information may be required in the event that you must send documents to them. Note that if you need to make address changes, you must do so prior to income tax slips production.
To the extent possible, adjust your employee year-to-date amounts before the end of the year: bonuses, vacation, group insurance amounts paid by an employee on sick leave, etc.
During the year-end period, you must also validate the personal income tax credits and tax reductions for the upcoming year. If certain employees are entitled to tax credits or reductions other than the basic personal amounts, it’s your responsibility to update this information in their employee file before the first payroll of the new year.
Relief measures for 2021
Certain relief measures were put in place in 2020 due to the pandemic, notably regarding taxable benefits in the context of telework. As of writing, the CRA has not yet announced if these measures will be extended to 2021. However, you may refer to the web page detailing these measures for 2020.
In 2020, the CRA issued specific guidelines for the filing of the T4s, requiring that income from specific periods of the year be reported in boxes 57 to 60. There are no such requirements for 2021.
For 2021, the workers compensation boards (WCB) for British Columbia, Alberta, Ontario, and Québec, have waived the WCB premiums on wages paid to employees on leave, who are eligible for the Canada Emergency Wage Subsidy (CEWS).