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Businesses are the engine of the Canadian economy as they provide the opportunity for individuals to work. If you have employees in your corporation (including yourself) – you must file a T4 slip by the end of February. With the T4 deadline fast approaching, it is important to understand the requirements of filing a T4 slip.
A T4 slip is an information return that is required to be filed by employers for payments made to their employees as a statement of remuneration paid. This may include filing a slip for yourself. You are required to file a T4 slip if you are an employer that paid an individual employee. This pay or remuneration can be through salary, wages, tips or gratuities, bonuses, vacation pay, commissions, taxable benefits, retiring allowances, or through deductions withheld during the year – to name a few examples.
The T4 is required if you had to deduct CPP/QPP contributions, EI premiums, PPIP premiums or income tax from the remuneration or if the remuneration was more than $500 or where the individual received taxable group term life insurance benefits.
The T4 should be completed based on the calendar year the payment was made – which may differ from when the services were provided and the corporation’s fiscal year. Oftentimes errors are made for when services are provided in late December and payment is made the following January – requiring the income to be included in the subsequent year T4. This is different from accrual accounting used by corporations that may make deductions for when services were provided.
Other common errors include missed taxable benefits. For instance, if you have vehicle(s) owned or leased by your company, you will need to provide the following information to determine the personal use benefit:
- Total kilometers driven in the year
- Number of business kilometers in the year
- Original cost of the vehicle, including GST
In addition, if the vehicle is leased, your accountant will require the following:
- The total lease cost for the year (including GST)
- The number of days the vehicle was available to the employee in the year (even if just sitting in the driveway)
- The amount if any that the employee reimbursed the company for the use of the vehicle (reimbursement must be made by Feb 15, 2023)
Owners of their own incorporated business who compensate themselves through wages, salaries or other means as noted above from their corporations are also required to file a T4 from their company to themselves.
If you hire an employee individually, perhaps a nanny to whom you are the employer – you are also required to file a T4.
There are instances that a T4 may not be appropriate. Such examples include the following:
- Payment of dividends to shareholders of the corporation would file a T5
- Payment of pensions, lump sum payments or payments to an unincorporated business or partnership may warrant a T4A
- Payments to non-residents (persons not resident in Canada) for services rendered in Canada may warrant a T4A-NR
- Employers within the construction industry paying subcontractors for goods and services connected with construction activities may warrant a T5018
These alternative forms have their own specified requirements to be considered.
The T4 slip details the income from employment as well as deductions for the following:
- Income tax
- CPP contributions
- EI premiums
- RPP contributions
- Pension adjustments
- Union dues
- Charitable donations
- PPIP premiums
The form also details the employees name, address and social insurance number.
The filing deadline for a T4 (as well as a T4A and a T4A-NR) is due the last day of February following the year the payment was made. Late filing penalties depend on the number of slips that were filed late, with a minimum charge of $100 to a maximum of $7,500.
Contact Shajani CPA to get your T slips filed.
This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. ©2023 Shajani CPA.
Shajani CPA is a CPA Calgary, Edmonton and Red Deer firm and provides Accountant, Bookkeeping, Tax Advice and Tax Planning services.