Payroll > Reports > Balancing Your T4 Report
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Balancing Your T4 Report
Each year, you are required to submit your T4 return to CRA, and issue T4 slips to all of your employees. If you do not balance your T4 summary, you may find yourself at the receiving end of a PIER review (Pensionable and Insurable Reporting), with corresponding interest and penalties on any amounts found payable.
When balancing your T4 return, keep the following in mind:
1) Balance a single T4 slip at a time. It is easier than trying to balance all slips at once.
2) Do not record anything until all slips are completed.
3) Do not save the balancing remittance until the T4 summary has been submitted to CRA, either electronically or by paper.
4) Make sure to check with CRA to ensure you are using the correct Rates for the year you are adjusting.
Balancing your T4 return is a step by step process.
1) Print a copy of your T4 slips. Do not worry about printing the T4 summary yet.
Close the reports once you have printed what you need.
2) When we balance the T4 report, we start with Box 16, Employee’s CPP contributions (or Box 17, Employee’s QPP contributions for employers in Quebec). You will need to determine if the amount in this box is correct. To do this, we use a formula:
(Box 14 - $3,500) *4.95% all except Quebec
(Box 13 - $3,500) * 5.4% Quebec
In the example above, we will do this calculation:
($45,692.24 - $3,500.00) *4.95% = $2,088.52 (rounded to the nearest cent)
3) According to the calculation, we have over deducted CPP for this employee. An adjustment will need to be made to make sure the CPP contribution is correct. To do this, go to Payroll > Create Paycheques.
4) Create a paycheque for the employee. The paycheque date and period should both read December 31st of the year you are working on.
5) Click Create Paycheques. The paycheque creation screen will open.
6) In the CPP (QPP) field, we want to enter how much we want to change the T4 summary by. In our case, that will be -26.56. To offset this, enter the opposite amount into the Federal Tax field. In this case, since the CPP (QPP) is negative, the Federal Tax will be positive.
7) Save the cheque, but do not record it. Go back to your T4 that you printed for this employee. We now need to turn our attention to Box 18, Employee’s EI premiums. To calculate this amount, you will take the amount in Box 14 and multiply it by 1.63% (1.27% for employers in Quebec). In our example:
$45,692.24 * 1.63% = $744.78 (rounded to the nearest cent)
8) This amount is slightly different than what is on the T4 return. In the Create Paycheque screen, click on the Payroll tab at the top to get back to the first screen.
9) Create another paycheque for your employee. You can now enter the change you need to make to your EI deduction, and offset it to Federal tax as you did with the CPP (QPP).
10) Save the cheque, but do not record it. If you are in Quebec, you will want to balance Box 55, Employee’s PPIP premiums as well. For example:
$45,692.24 * 0.548% = 250.39
Run the same sort of calculation if your province has this deduction as well, using your province’s percentage rate. Do the adjustment the same way you did with CPP (QPP) and EI.
11) At this point, if you have any other employees, you will want to follow the same process until all employees are completed and balanced.
12) When all of your employees are completed and balanced, go to the Record tab of the paycheque screen. Select all of your records and click on Record.
13) Re-generate your T4 return, including the T4 summary.
14) Your individual T4s should now reflect the balanced numbers, calculated earlier.
15) Your T4 summary will now either reflect a refund or balance due, depending on the outcome of your adjustments.
16) Submit your T4 return as normal, and provide your employees with their T4 slips. Once you have submitted your return to CRA, go to Payroll > Remit Deductions.
17) There will be an outstanding payroll remittance for December of the year you are working on. This will match the outcome of your T4 report. Save this remittance so that it will post to your Accounts Payable as normal. This clears your payroll source deductions accounts so that you can begin fresh with the next year of payroll.
Last updated on February 19, 2020 by FCC AgExpert