The first snowflakes gently fell from the sky this past weekend in Waterloo, a reminder that the holiday season is fast approaching. At our house, we were tuning up the snow blower and writing Christmas lists. It is also that time of the year when organizations should create a year-end payroll checklist and prepare for any tune-ups needed for the first payroll of the New Year. We all want to stay on the Canada Revenue Agency’s “nice” list and off of the “naughty” list!
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
What’s new for 2017?
Highlights for 2017 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 2017.
- The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2017 will be $55,300, up from $54,900 in 2016. The new ceiling was calculated using a CPP legislated formula that takes into account the growth in average weekly wages and salaries in Canada.
- Contributors who earn more than $55,300 in 2017 are not required or permitted to make additional contributions to the CPP.
- The basic exemption amount for 2017 remains $3,500.
- The employee and employer contribution rates for 2017 will remain unchanged at 4.95%. The self-employed contribution rate will remain unchanged at 9.9%.
- The maximum employer and employee contribution to the CPP for 2017 will be $2,564.10 each. The maximum self-employed contribution will be $5,128.20. The maximums in 2016 were $2,544.30 and $5,088.60, respectively.
Your year-end payroll checklist
In the Christmas list–making spirit, here is a recap of a 10–step checklist for your payroll year-end and New Year payroll:
- Verify active employee data
- Names, addresses, birth date and social insurance numbers (SINs)
- Federal and provincial TD1 forms for each employee
- 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
- 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
- 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
- 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
- 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
- Prepare the pay schedule for 2017
- Ensure that your calendar is set for your pay schedules
- Check to see that processing or payment days don’t fall on holidays
- 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
- 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
- Know your payroll rates for the coming year
- For a comprehensive overview of current payroll rates, see this HRinfodesk Quick Reference table, updated for 2017 (login required). Request a free trial of HRinfodesk here.
If you’re looking for extra help with your year-end payroll processes, look no further than PaySource®, co-published by First Reference and CPA Canada.
Click here to learn how PaySource saves payroll pros time, money and unnecessary frustration with their payroll compliance obligations, and to take a free trial.
Marcia Scheffler
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