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How to avoid penalties and interest issuing T4’s?
- February 6, 2022
- 1:03 pm
- One Comment
- Payroll
How to avoid penalties and interest issuing T4’s?
We have clients asking us how they can ensure that they payroll is correct? and
what they can do to avoid penalties and interest?
February is the month when all the businesses who have employees need to issue T4’s for the past calendar year. The due date is the last day of February every year, so now is perfect timing to do it. The CRA charge penalties for failure to file on time as well as interest for not paying the correct amount of deductions. CRA T4 Penalties and Interest
Following these steps will allow you to know if you have paid all the amounts correctly and if you must make any correction and how to do it.
1).- Obtain a T4 Summary: Depending how you do payroll in your company (Payroll software or manually). Summarize all the Salaries paid, CPP, EI, and Income Tax deducted. (If you have a payroll software you can do so easily as there are reports for this). Alternatively, manually can be done in MS Excel. If your payroll software issues T4’s you can check it from here as well from the T4 Summary (Line 80 on the T4 Summary).
Sample below, line 80 on the T4 Summary:
2).- CRA My business: Login to the CRA My Business Account and check the source deductions remitted to the CRA for last year (2021).
To do this, once you are logged in, you will need to go to Payroll –> Amount owing –> 2021 –> Tax year balances (look at the amount paid for 2021). This is the total amount of source deductions that the CRA received from your business.
3).- Compare the TOTAL amount of source deductions remitted with the total of amounts in the T4 Summary or Summary.
Sample below:
4).- Amounts match: If the amounts are the same, Great! You will have paid the amount required. You just need to ensure that the CRA receive your T4’s and T4 Summary by the end of February.
5).- Underpayment: If there is any difference (higher than $2.00) and is an underpayment (The CRA received less than what your software/MS Excel summary says) you can make a payment to the CRA now, and you do not need to wait until you receive a notice from the CRA (this will save you interest!). You can pay from your financial institution or utilizing the FREE Pre-Authorized Debit from the CRA (but usually takes 7-10 days to setup a Pre-authorized payment, so it is not the fastest method to pay the CRA). You still have to submit the T4 and T4 Summary by the end of February.
5).- Overpayment: If you have a paid more to the CRA than what you had to, you have a difference in your favor, you can request to apply that overpayment to the current year (2022). And again, submit the T4 and T4 Summary by the end of February.
If you have any question you can reach to us, we will be happy to be of assistance.