It is that time of the year again when people are just starting to think about making their holiday lists. Organizations who want to stay on the Canada Revenue Agency’s “nice” list and off of the “naughty” list should start ticking off the boxes on a year-end payroll checklist as well as preparing for the first payroll of the New Year.
The end of the year is the right time for a review of your payroll and employee data. A year-end check can save money wasted due to costly compliance fines for issues such as CPP, EI, and income tax deductions in the year ahead. To stay on the “nice” list, you need to ensure:
- Your year-end payroll filing is accurate and compliant
- You are up-to-date on all new legislative requirements
Highlights for 2015 include being aware of new rates, limits and maximums and keeping abreast of any changes to provincial employment standards, pension legislation or workers’ compensation. The CRA has already released the maximum pensionable earnings for 2015.
- The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2015 will be $53,600—up from $52,500 in 2014. The new ceiling was calculated according to a CPP legislated formula that takes into account the growth in average weekly wages and salaries in Canada.
- The basic exemption amount for 2015 remains $3,500.
- The employee and employer contribution rates for 2015 will remain unchanged at 4.95%, and the self-employed contribution rate will remain unchanged at 9.9%.
- The maximum employee and employer contribution to the plan for 2015 will be $2,479.95 each and the maximum self-employed contribution will be $4,959.90. The maximums in 2014 were $2,425.50 and $4,851.00.
In the holiday list-making spirit, here is a 10-step checklist for your payroll year-end and New Year payroll:
1. Verify active employee data
- Names, addresses, birth date and social insurance numbers (SINs)
- Federal and provincial TD1 forms for each employee
2. Perform any year-end bonuses
- Some companies may have discretionary bonuses tied to performances
- Other companies may have a non-discretionary holiday appreciation bonuses
- Ensure bonuses are properly allocated according to your internal policies
3. Verify terminated employee data
- Any employee who received a pay cheque during the year will need to receive a T4 slip for that year, whether or not they are currently an employee at year-end.
4. Verify and review that you have the correct employee deductions
- Income tax deductions
- Canada Pension Plan (CPP contributions)
- Employment Insurance (EI) premiums from each employee
- You may have a program or payroll service that calculates the deductions automatically for you each payroll run but you will still want to spot check to ensure calculations are correct. (See the Canada Revenue Agency’s T4001 – Employers’ Guide to Payroll Deductions and Remittances for details if necessary.)
- If you have made errors such as overpaying an employee or deducting too much or too little CPP or EI, the above mentioned page of the CRA’s website explains how to correct each of these mistakes.
5. Review employee wages, sick time, and accrued vacation
- Prepare for any adjustments to employee wage rates or salaries for the New Year
- Prepare to reset sick days or sick time accrual according to internal policies
- Pay out or carry over any accrued vacation according to your internal policies
6. Verify and review employee benefits paid out
- Ensure benefits paid out have been allocated properly as taxable or non-taxable according to the CRA benefits and allowances chart
- Review employee eligibility for benefits or allowances for New Year
7. Prepare the pay schedule for 2015
- Ensure that your calendar is set for your pay schedules
- Check to see that processing or payment days don’t fall on holidays
8. Complete a T4 slip for each employee
- If you have employees, you have to file a T4 and forward information slips to your employees each year by the last day of February following the calendar year to which the information returns apply.
- Your payroll software or payroll provider probably tracks federal and provincial taxes and automatically fills in T4 slips for you – but you should still review.
9. Complete and remit a T4 Summary form
- Once all your T4 slips are done, complete (or have your payroll software or provider produce a report) your T4 Summary form for the Canada Revenue Agency, which will report the totals of the amounts reported on your T4 slips.
10. Know your payroll rates for the coming year
For a comprehensive overview of current payroll rates, see the Quick Reference list (login required/free trial available) provided by Yosie Saint-Cyr, LL.B., Managing Editor, HRinfodesk, published by First Reference, updated for 2016.
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