Preparing for year end – a handy checklist

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Before you take time off for the holidays, take a few moments to ensure your company payroll is complete for the year. We’ve compiled a handy checklist you can use to make the process much easier.

Download PDF checklist:  Year End Checklist- PaymentEvolution

Payroll year end checklist

  1. Check that CPP, QPP, EI, QPIP, federal and provincial income tax amounts do not exceed 2014 maximum limits.
    1. Employee’s Portion:
      • CPP: $2,425.50; EI: $913.68;
      • Quebec QPP: $2535.75; EI: $743.58; QPIP: $385.71;Employer’s Portion:
      • CPP: $2,425.50; EI: $1279.15;
      • Quebec QPP: $2535.75; EI: $1041.01; QPIP: $539.58;
  2. Address employees’ C/QPP contributions, who turned 18 or 70 in the year
  3. Verify active employee data (names and addresses); Validate social insurance numbers (SINs), especially for those who are non-residents or citizens (ie SIN beginning with the number “9” and/or those with an expiry date)
  4. Verify your Business Number (BN) or Québec Enterprise Number (NEQ) and address
  5. Make adjustments (any bonus or commissions have not been paid out) to last two final pay cheques and remittances
    • Generate/edit T4 and RL-1 (QC)
      • Make sure Box 24 and Box 26 of the T4 are completed even if they are zero; enter “0.00” in Box 24 and 26 if zero
      • Make sure Box 24 not exceed the annual maximum insurable earnings ($48,600.00)
      • Make sure Box 26 not exceed the annual maximum pensionable earnings ($52,500.00)
      • Make sure Box G and I of the RL-1 are completed even if they are zero; enter “0.00” in Box G and I if zero
      • Make sure Box G not exceed the annual maximum pensionable earnings ($52,500.00)
      • Make sure Box I not exceed the annual maximum insurable earnings ($69,000.00)

    If there is no amount or code to report in a box leave it blank, do not fill or enter the word “Nil”

  6. Report RPP or DPSP registration number in Box 50 of the T4
  7. Since 2011 (for the 2010 tax year) retiring allowances are reported on the T4 slip instead of the T4A slip; using code 66 for eligible amounts and code 67 for non-eligible amounts.
  8. Review any manual cheques amounts are accurate and have been issued
  9. According to your company policy, check any vacation accrual and loan payments and carry forward to the following year
  10. Balance WSIB/WSB, EHT(ON), MSP(BC), HE Levy(MB), HAPSET(NL) and Northwest Territories(NT)/Nunavut(NU) payroll tax rates, if applicable
    • Review Revenue Quebec annual summary:
      • Health Service Fund (HSF)
      • Compension Tax
      • Commission des normes du travail (CNT)
      • Workforce Skills Development and Recognition Fund (WSDRF)
      • Commission de la santé et de la sécurité du travail (CSST)
  11. Balance your payroll journal

If you aren’t using a modern payroll system to make the year-end process simple – sign up for PaymentEvolution Payroll.

Preparing for year end – tax slips

IMG_20141202_170727With year end fast approaching, businesses have to make sure that they are well prepared for the upcoming tax season. It is important to make sure that your payroll account is all in order to issue the T4 and RL-1 slips to employees and contractors before the deadline.

The good news is that your PaymentEvolution Payroll account will automatically generate the required T4, T4A and RL-1 slips for your staff. It’ll even create the required company summaries for filing with the Canada Revenue Agency and Revenu Québec. Even if you haven’t run payroll with PaymentEvolution yet, there’s still time to carryover your year-to-date information to create these tax slips.

What are T4 Tax Slips?

A Canadian T4 tax slip, or Statement of Remuneration Paid, is prepared and issued by an employer to advise employees how much employment income they were paid during a tax year and the amount of income tax that was deducted. Québec employees will receive a RL-1, Employment and Other Income Slip, as well a T4 tax slip.

Who in your company should be given a T4 slip?

T4 slips should be issued for each employee who received remuneration with respect to employment where:

  • Deductions for Canada/Quebec Pension Plan contributions, Employment Insurance, Quebec Parental Insurance Plan premiums and/or income tax were required.
  • The remuneration was $500.00 or more
  • Any amount of group term life insurance was provided.

Employment income includes salary, bonuses, vacation pay, controlled tips, commissions, payroll deductions, taxable allowances, the value of taxable benefits and payment in lieu of notice.

What is the Deadline for issuing T4 slips?

T4 tax slips must be completed and issued by the last day of February the year after the calendar year to which the T4 tax slips apply. For payments you made in 2014, the deadline is March 2, 2015 (Feb 28, the typical deadline, falls on a Saturday) .

Note that employees who work in more than one province during the year must have a separate T4 slip for the earnings and payroll deductions for each province in which they were employed. For example, an employee who worked in both Alberta and Ontario will need a separate T4 for the remuneration paid in each province.

As well, an employee must receive a separate T4 from each employer they worked for in a calendar year. For more information regarding T4 slips or to view a sample visit the Canada Revenue Agency website.

How to start your year-end and T4 process

Follow our handy guide on how to complete your year-end and generate your T4, T4A and RL-1 slips.

Holiday bonuses and gifts

Gift giving season is here – where employers are looking for ways to make their employees happy and employees are waiting anxiously to see how the year closes for them. Every business is looking for a way to reduce their taxes and show their employees a little appreciation for their loyalty and hard work. Giving out employee gifts is a great way to do that. Your staff get something awesome, and your business gets a bit of a tax break. Before you start handing out the expensive gifts, you need to know a few rules.

A reason to give employee gifts –  A holiday, birthdays, the birth of a baby, or a wedding are all acceptable excuses to get generous and show your appreciation for employees. Another good reason is a work anniversary gift if the employee has worked for your company for at least 5 years, and they have not had a previous work anniversary gift within the past 5 years. Once you have picked your reason, don’t start handing out the goodies just yet. While cash is usually a one-size-fits-all kind of thing, in the case of employer tax-free gifting, it is a no-no. Holiday Gifts

Know your limit – An employer can give an employee up to $500 a year in non-cash gifts before the gift becomes taxable. Anything over that $500 limit, or any form of cash is considered a tax benefit, leaving the employee with additional gift taxes to pay at the end of the year.

Not sure if your gift fits the criteria? –  The Canada Revenue Agency has an easy to use tool that can help you determine if your gift is tax free or not. Use the link http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/gfts/txblbnft/ntrdctn-eng.html to check it out!

Some examples of other taxable and non-taxed employee gifts? The Canada Revenue Agency has a cool chart here.  The chart also shows you that inexpensive items with a company logo (like t-shirts, pens, and coffee mugs) aren’t taxable and aren’t even counted in the $500 annual limit.

Some things you’d think would be non-taxable are actually taxable. Here is a list of some tricky gifts that will have your employees covering the tax:

  • Gift Cards and Gift Certificates: These are treated the same as cash when it comes to taxable gifts. Gift cards and certificates in any amount are unfortunately taxable. Get around this by giving them the actual item, and not what they would have bought with the gift card. For example, instead of giving Cindy a $100 certificate to her favorite candle store, give her a gift basket from the store valued at $100.
  • Stocks and Securities: Just like gift cards, stocks are considered cash and will leave your employees coughing up the tax.
  • Gold Nuggets: Don’t laugh! The Canada Revenue has this listed as a taxable gift item. Therefore, if you happen to have a stash of gold nuggets sitting around in your office, you should keep them (or even lock them up in a safe at home) and come up with something else to give to those you employ.
  • Lavish parties: Most businesses assume throwing a party for employees (such as a Christmas party) is not taxable, but it really depends on the value of the party. Any party that costs the employer more than $100 per person is taxed. Keep parties simple and budget friendly to avoid coughing up extra tax money later. For example, rent a cheap Santa suit instead of hiring an actor, and serve affordable finger foods instead of a five-course meal with steak and lobster. Your employees will thank you later!
  • Meals: Think buying your employee dinner isn’t taxed, you’re wrong. The only time a meal is not taxed is when the employee has worked at least 2 hours of overtime on top of their normal shift, and then the meal must be $17 or less in value.
  • Tuition: One would think a scholarship wouldn’t be taxed, but if the class or course is not related to the job, it is a taxable gift. If the scholarship is given to an employee’s child for secondary education, the child is responsible for the taxes.

Track these gifts appropriately: You can easily track these bonuses and gifts in your payroll account – use our handy reference on how to track them. So, what are you planning on giving your staff this year?

TaxCycle integration for your tax returns

Our friends at TaxCycle have announced a cool integration with PaymentEvolution Payroll that seamlessly brings in your year-end tax slips (ie T4 slips) so your accountant can prepare your personal tax return. You don’t need to hang onto paper slips just so you can do your taxes – with TaxCycle, you can import your slip electronically and avoid data re-entry errors.

“Reducing data re-entry is critical to running an efficient, profitable tax practice,” states CEO & Founder Cameron Peters of Trilogy Software (makers of the TaxCycle suite). “PaymentEvolution already offers electronic delivery of T4 slips to employees. Now these employees can provide that electronic file to the tax professional preparing their personal tax return in TaxCycle T1. No need to print the slip, so there’s no data re-entry.”

The TaxCycle team has created some of the best tools for document management and professional tax preparation. If you haven’t tried TaxCycle yet, you can get a free trial at http://TaxCycle.com

TaxCycle

Improving the workflow of tax preparers is the mission of Cameron and the TaxCycle team. He says, “Data integration like this one is especially important for preparers during busy tax season. A quick export of an XML file for drag-and-drop import into a TaxCycle T1 return not only saves precious time but prevents critical data re-entry errors. Every minute a tax preparer spends on data entry, or reviewing re-entered data, is one that could have been spent providing tax expertise to their clients.”

The PaymentEvolution T4 import will be available in early 2015 for preparing 2014 T1 personal tax returns. TaxCycle users will be able to drag and drop XML files onto the TaxCycle window to quickly add the slip data to the personal tax return.

See the press release announcement here: Drag-and-drop import of PaymentEvolution T4 slips into TaxCycle T1 personal tax returns

What Every Small Business Needs to Know about Payroll Tax Compliance

T4 Tax SlipIt’s great to be your own boss, calling your own shots. There’s great satisfaction in pursuing your own dreams and passions. With that comes the responsibility and obligation to abide by certain rules and regulations. As a small business owner, managing finances properly is vital to your long-term success. .

The repercussions of failing to manage your finances can be very significant – especially when you consider the penalties for making mistakes. If you are an employer, for instance, you have to know and follow the Canada Revenue Agency (CRA) rules around payroll so you can collect, report and file payroll taxes properly.

Here’s what every small business needs to know:

1) Are you an employer?

You are an employer if you have employees. But it’s entirely possible to have workers who are not employees, so you need to know the difference between them. The Canada Revenue Agency’s RC4110 – Employee or Self-Employed guide explains the difference.

2) If you are an employer, you need a payroll account number with the Canada Revenue Agency.

If your business already has a business number (BN), all you need to do is add a payroll account to your existing BN. If your business doesn’t have a BN, you will need to register for a BN and a payroll account. It’s not difficult and the CRA website explains how to register for a business number.

3) Forms to be filled when you hire employees and when employees leave your company

When you hire an employee, you need to get their Social Insurance Number (SIN) and have them complete Form TD1, Personal Tax Credits Return, which is used to determine how much tax will be deducted from their employment income. You should keep this on file and ask your employees to submit a new form to you at the start of every year.

When an employee leaves your company (or has any other interruption of earnings), you will need to fill out a Record of Employment.

Using an online payroll service like PaymentEvolution Payroll will make creating and filing these forms fast and easy.

4) You need to deduct the appropriate amounts of CPP (Canada Pension Plan) contributions, EI (Employment Insurance) premiums, and income tax deductions from employees’ pay cheques, as well as calculating your share of CPP and EI for every payroll. 

The CRA Calculating Deductions guide provides the manual details. Using a cloud-based payroll service will greatly simplify these calculations and help you maintain a proper history for reporting purposes.

5) Amounts deducted from employee pay cheques along with your share of CPP contributions and EI premiums need to be remitted to the Canada Revenue Agency, accompanied by the appropriate form.

As due dates vary depending on what type of remitter you are, you’ll want to visit this CRA page for more information. To ensure you remit on time (and avoid some stiff penalties) consider using an electronic payment service to automate these for you.

6) You will need to complete and file CRA information returns annually.

Each year you will need to complete a T4 slip for each employee, and a T4 Summary which you will send in to the Canada Revenue Agency by the end of February, and send a copy of the appropriate T4 slip to each employee.  See the CRA’s T4 – Information for Employers. Modern payroll services offer employee self-service sites like PayChequer.com

7) You must keep adequate records and these must be kept for six years.

“Adequate” means that your records have to “provide enough details to determine all your tax obligations and entitlements”. You also need to keep the original documents to support your records.

8) When you close your business, you must also close your account.

Closing your payroll account means following certain prescribed steps by certain dates – this guide outlines the steps you need to follow when your business stops operating.

Small Business and Payroll – things you should know

Breeze through payrollPayroll – a word that usually increases stress levels for the small business owner. After all, a small business is focused on keeping customers happy, managing staff and finding new clients. And as an entrepreneur, all you really want is a good night’s sleep.

Whether you’re employing one or 50 employees, understanding the concept of payroll can be a difficult for small business owners. Making sure that payroll goes through each and every pay period is a stressful part of being an employer. However, the process is not as simple as making a bank transfer. Navigating the associated Canada Revenue Agency (CRA) paperwork alone can be a maze of uncertainty for a small business employer.

As an example, failing to pay CRA remittances on time can result in automatic penalties ranging from 3 per cent to 10 per cent of funds owed, based on how late the remittance was in calendar days (one to seven or more days). Late payment for a second time, if the result of negligence, can result in a whopping 20-per-cent penalty and even jail-time. So what are the few crucial topics small-business owners need to know to efficiently manage their payroll process?

  1. Understand what is taxable and what isn’t. Nearly everything an employee receives from an employer is considered taxable income. These benefits might include expenses, an allowance, or the use of property, such as a car, laptop, or phone. The value of these employee benefits is based on the out-of-pocket expense an employee would normally incur. Once an employer determines the fair market value, the item can then be included in payroll. An additional calculation may have to be added to account for the GST/HST and PST, which is why this Benefits Chart comes in handy, including all CPP, EI deductions and T4 codes.
  2. Maintain accurate and current employee records. Keeping up-to-date records helps those individuals in the company responsible for processing payroll quickly deal with CRA regulations. When submitting employee T4s for instance, an employer is required to have current SIN numbers and up to date addresses for all employees. When processing Records of Employment (ROEs), accurate information is vital for this process to be as hassle-free as possible. It can also help small business employers avoid the automatic penalties that accompany missing the remittance due date. One overlooked piece of data can easily result in a fine.
  3. Stay on top of employee regulations and standards. Each province and territory has its own labour standards, with overall guidance coming from the CRA. Benefits and additional payments, such as overtime, the calculation of a daily wage during a statutory holiday, and the amount of vacation time to which an employee is legally entitled, all vary depending on provincial labour standards.
  4. Understand the difference between an employee and an independent contractor. Whether someone is an employee of the business, or a contractor – an independent business in their own right working on behalf of the business – can make a big difference to the CRA. For instance, an employee has employment insurance (EI) rights, and an employer must pay income tax and CPP contributions. For most contractors, however, the small business employer has none of those responsibilities. How someone is classified comes down to whether they are in a ‘contract of service’ (employer-employee relationship) or a ‘contract for services’ (business relationship). The CRA can examine the relationship and issue a ruling if there is any doubt.
  5. Stay on top of year end reporting. Year-end reporting is time sensitive and the payroll department should be aware of the dates required to file reports. A T4 summary along with copies of all the individual T4s must be sent to the CRA, and individual T4s must be distributed to each employee. These T4 forms must be delivered no later than Feb. 28 of each year. One of the biggest challenges for an employer is filling out the T4 correctly. Errors are costly.

Sounds like too much information to handle? Understanding the intricacies of the payroll process is indeed complex and simply too overwhelming for most small business owners. However, at PaymentEvolution we’ve designed payroll for small businesses which makes the entire payroll process a breeze. Everything from quick under-5-minute signup to 30 second payruns was created knowing that you’re too busy to manage the complexities. If you’re still doing payroll the old way and want a simpler, more reliable way, register for Payroll by PaymentEvolution.

Everyday payments

Everyday paymentsProcessing payroll and paying your staff electronically has always been super easy with PaymentEvolution. Today, we’re making it even more convenient – you can now pay your staff on any weekday. Payday no longer needs to be on a Friday. If you have a staff member that wants to be paid every Tuesday, no problem!
We’ve enabled everyday electronic payments for everyone. If you don’t have electronic payments yet, you can register and turn it on right away. We’re not increasing any fees for this service – electronic payments remains just 50 cents per transaction. Go ahead – pay your staff any weekday!