Year-End Payroll Checklist for Canadian Employers

Year-end payroll processing is one of the most critical compliance tasks for Canadian employers. The Canada Revenue Agency requires that T4 information returns and slips be filed and distributed to employees by the last day of February following the calendar year. Missing this deadline can result in penalties of $100 per day for each slip, up to a maximum of $7,500.

The first step in your year-end payroll process should be verifying employee information. Confirm that all Social Insurance Numbers, legal names, and addresses are accurate and up to date. Incorrect SINs are one of the most common reasons for CRA to flag T4 submissions, and correcting errors after filing creates additional administrative burden.

Next, reconcile your source deductions. Compare the total amounts of CPP contributions, EI premiums, and income tax withheld throughout the year against the amounts remitted to CRA. Any discrepancies should be identified and resolved before preparing T4 slips. Under-remittance can result in interest charges and penalties.

Review all taxable benefits provided to employees during the year. Common taxable benefits include personal use of a company vehicle, employer-paid group life insurance premiums exceeding $25,000 in coverage, and certain gifts and awards. These amounts must be included on the T4 slip and may affect CPP and EI calculations.

If your organization provides employee stock options, retirement allowances, or other special compensation, ensure these are reported correctly. The tax treatment of these items can be complex, and errors in reporting can create problems for both the employer and the employee at tax time.

Once all T4 slips have been prepared and reviewed, file them electronically with CRA using the T4 Web Forms application or compatible payroll software. Electronic filing is mandatory for employers with more than 5 slips. Distribute copies to employees promptly so they can begin preparing their personal tax returns.

At Veleron Accounting, we assist employers with year-end payroll compliance, T4 preparation, and source deduction reconciliation. If you need support with your year-end payroll process, contact us before the February deadline.