Quiz 6 - Year End Federal

1. What is the purpose of doing a reconciliation of the Canada Revenue Agency remittances?

Ans: The purpose of doing a reconciliation of the Canada Revenue Agency (CRA)
remittances, is to help the employer identify and rectify any discrepancies between what was
reported as received by the CRA and what was deducted and remitted.

2. True or False. Payments remitted to the Canada Revenue Agency during the year are debited
to the employer’s source deductions account.

3. Taxable benefit values are to be included in an employee’s income:

a. on a monthly basis
b. annually
c. on a pay period basis
d. at least semi-annually

4. What might cause an employee to have an over-contribution to the Canada Pension Plan or
Employment Insurance?
Ans: The employee may have over-contributed to the Canada Pension Plan or Employment
Insurance, when adjustments for a manual cheque are not made, while issuing the cheque.

5 Benefit entitlements apply to which type(s) of pension plan?

.
a. Defined Contribution
b. Deferred Profit Sharing
c. Defined Benefit
d. All of the above
6. Complete the following chart by indicating the pension adjustment formula.
TYPE OF PLAN FORMULA FOR CALCULATING THE
PENSION ADJUSTMENT
Combination Plan
Defined Contribution Pension Plan (or
Money Purchase)
Deferred Profit Sharing Plan
Defined Benefit Pension Plan

7. Calculate the pension adjustment for each employee, assuming that they worked and were a
member of the pension plan for the full calendar year.

a. Francine Howell belongs to a defined contribution pension plan where the employee
contributes
2% and the employer contributes 50% of the employee contributions. Francine’s pensionable
earnings are $63,000.00.

b. Genny Fowler is a member of a defined benefit pension plan that has a flat monthly benefit of
$23.00.
c. Laurence Lamont is a member of a defined benefit pension plan that has a pension benefit of
2% of his career average earnings. His pensionable earnings are $73,500.00.

d. Joshua Anthony is a member of a defined benefit pension plan with the following formula:

plus

Joshua’s earnings were $52,523.00; the YMPE is $51,100.00.

8. Which of the following amounts is not reported on a T4 information slip?

a. Employee registered pension plan contributions

b. Employee Registered Retirement Savings Plan contributions
c. Employer registered pension plan contributions
d. Employer Registered Retirement Savings Plan contributions

9. Jerome Miller worked in Alberta, British Columbia, Ontario and Nova Scotia last year.
How many T4 slips will Jerome receive?
Ans: Four - Employees must have separate T4 slip for earnings and deductions for each
province in which they were employed, if they have worked in more than one province during
the year.

10. In which of the following situations would an “X” be entered in the CPP\QPP section of
box 28 of the T4 slip?

a. The employee turned 18 in July.

b. The employee turned 70 in March.
c. The employee was considered disabled by the Canada Pension Plan in October.
d. The employee turned 17 in January.

11 Complete the chart with the correct code to be used in the “Other Information” area at the
. bottom of the T4 slip.
CODE DESCRIPTION
Employment commissions
Fishers – Gross earnings
Personal use of employer’s automobile or motor
vehicle
Employee home relocation deduction
Other taxable allowances and benefits
Indian employee
Interest‐free and low‐interest loans
Security options benefits
Eligible retiring allowances

12. National Bearings, an Alberta organization, is preparing its year-end information slips.
Prepare the T4 slip for Teresa Lauzon, based on the information provided below. Teresa’s
Social Insurance Number is 695-830-422.
TOTALS

Regular earnings $75,000.00

Vacation pay $ 5,769.24
Home relocation loan non‐cash taxable benefit $ 1,956.25
Employer‐provided automobile non‐cash taxable $ 5,303.33
Benefit
Employer contributions to employee’s RRSP $ 2,600.00
CPP contributions $ 2,306.70
EI premiums $ 839.97
Income tax deducted $25,342.17
EI insurable earnings $45,900.00
CPP pensionable earnings $50,100.00
Amount eligible for the home relocation loan $ 1,235.00
Deduction
Group term life insurance non‐cash taxable $ 1,200.00
Benefit

National Bearings 20XX

91,828.82 25,342.17

AB 2,306.70 45,900.00

695 830 422 50,100.00

839.97
LAUZON TERESA

34 5,303.33 36 1,956.25 37 1,235.00

40 3,800.00
13. National Bearings also has offices in British Columbia and is starting to prepare the T4 slips
for the employees in those locations. Complete the T4 slip for Crystal Crane, Social
Insurance Number 788-444-999, who works in the Vancouver office. The company has a
defined contribution registered pension plan.
TOTALS

Regular earnings $98,000.00

Performance bonus $15,000.00
Home relocation loan non‐cash taxable benefit $ 1,629.63
Employer‐provided automobile non‐cash taxable benefit $ 8,620.00
Country club membership non‐cash taxable benefit $ 5,441.40
Group term life insurance non‐cash taxable benefit $ 1,200.00
Employee contributions to a registered pension plan (plan $ 5,800.00
#9876589)
Employer contributions to a registered pension plan $ 2,900.00
CPP contributions $ 2,306.70
EI premiums $ 839.97
Income tax deducted $59,749.87
EI insurable earnings $45,900.00
CPP pensionable earnings $50,100.00
Amount eligible for the home relocation loan deduction $ 814.90
Charitable donations $ 2,400.00
 National Bearings 20XX

129,891.03 59,749.87

BC 2,306.70 45,900.00

788 444 999 50,100.00

839.97
CRANE CRYSTAL
5,800.00 2,400.00

8,700.00 9876589

34 8,620.00 36 1,629.63 37 814.90

40 6,641.40

14. Prince Packaging has offices throughout Nova Scotia. John Frame, Social Insurance Number
222-555-777, had worked for the company in their Antigonish office from July 1982 until
his employment was terminated in November of this year. When his employment was
terminated, he was fully vested in the company’s defined contribution registered pension
plan, which he joined in 1984. Upon termination, John received a retiring allowance of
$86,000.00. John had his employer transfer the entire eligible amount to a RRSP and took
the non-eligible amount in cash.

Calculate the eligible and non-eligible portions of John’s retiring allowance as well as the
income tax withheld on the amount received in cash. Include these amounts when completing
John’s T4 slip.
The $101,356.00 income tax shown does not include the amount withheld on the retiring
allowance.
TOTALS

Regular earnings $127,000.00

Performance bonus $ 35,000.00
Commissions $ 56,923.00
Employer‐provided automobile non‐cash taxable benefit $ 5,237.00
Group term life insurance non‐cash taxable benefit $ 1,650.00
Employee contributions to a registered pension plan (plan $ 3,810.00
#3589562)
Employer contributions to a registered pension plan $ 3,810.00
CPP contributions $ 2,306.70
EI premiums $ 839.97
Income tax deducted $101,356.00
EI insurable earnings $ 45,900.00
CPP pensionable earnings $ 50,100.00
Charitable donations $ 1,600.00
15. True or False. A paper copy of the T4 Summary form is required, regardless of the method
used to file the T4 slips.
Ans: False. A paper copy of the summary form is not required, if the Canada Revenue
Agency copies of the T4 slips are filed electronically.

16. Thorold Industries completed the T4 slips for its employees. Given the following
information, calculate the amount the company would report on line 80 of the T4 Summary
form. Thorold had a reduced Employment Insurance rate of 1.238 for the taxation year.

Employee Canada Pension Plan (CPP) contributions: $45,985.72

Employee Employment Insurance (EI) premiums: $38,922.84
Employee income tax deducted: $394,720.44
17. Complete the following chart with the correct box or code number for a T4A slip.
BOX # INFORMATION
REQUIRED
18 Lump‐sum payments
48 Fees for services
13 Recipient’s account number
28 Other income
106 Death benefits
22 Income tax deducted

18. Give a description for each of the following T4A slip ‘other information’ codes.
CODE DESCRIPTION

119 Group term life insurance plan

premiums
125 Disability benefits paid out of a
superannuation or pension plan
104 Research grants

116 Medical travel assistance

105 Project grants, bursaries, Scholarships,

fellowships, artists’ and prizes

19. Connolly Corporation, an Ontario organization, paid a $24,000.00 death benefit to Suzanne
Knowles, the widow of their employee, Jerome Knowles, after he passed away in
September.
Calculate the income tax withholding on the death benefit and complete the T4A for Suzanne.

Death benefits are taxed using the lump-sum tax rates; however, the first $10,000.00 of a death
benefit is exempt from tax.
STEP ACTION
1 Subtract $10,000.00 from the death benefit being paid to determine
the taxable amount.
2 Look up the lump‐sum income tax rate on the amount from Step 1.
3 Apply the income tax rate from Step 2 to the amount from Step 1 to
calculate the income tax to withhold.
STEP ACTION
1 Subtract $10,000.00 from the death benefit to determine the
taxable amount.

Death benefit $24,000.00

Exemption - 10,000.00
Taxable amount $14,000.00
2 Look up the lump-sum income tax rate on the amount from Step 1.

The lump-sum income tax rate to apply to a payment of $14,000.00 is

20%.
3 Apply the income tax rate from Step 2 to the amount from
Step 1 to calculate the income tax to withheld.

Income tax = $14,000.00 x 0.20

= $ 2,800.00

Net payment $24,000.00

- 2,800.00
$21,200.00

Connolly Corporation 20XX

2,800.00

KNOWLES SUZANNE

106 24,000.00

20. What is the process for claiming a refund of an overpayment of remittances to the Canada
 Revenue Agency?

21 What is the purpose of the Pensionable and Insurable Earnings Review audit check?
.

22. Provide two examples of situations that would result in a Canada Pension Plan deficiency.

Ans: Below are the situations that would result in a Canada Pension Plan deficiency:

1. The employee was set up in the system incorrectly

2. Taxable benefits and allowances were added to the employee’s record after the
last pay of the year was processed
3. All the earnings reported in box 14 are not pensionable but the same amount is
reported in box 26
4. Manual cheques were issued with no withheld CPP contributions

23. Provide two examples of situations that would result in an Employment Insurance
deficiency.

Ans: Below are the situations that would result in an Employment Insurance deficiency.
1. The employee was set up in the system incorrectly
2. The earnings are not insurable, if an individual has more than 40% of the voting
shares of the organization; then in this case an “X” should be entered in box 28,
Employee Insurance (EI) exempt
3. Manual cheques were issued with no Employee Insurance (EI) premiums
withheld
4. Not all the earnings reported in box 14 are insurable but the same amount is
reported in box 24
24. Which method of filing can be used by an employer who files 45 information slips?

• a. Internet file transfer

• b. Paper
• c. T4 Web forms
• d. All of the above

25. True or False. The CRA will issue a multi-year approval to an organization that develops its
own customized information slips.

26. List three ways to prepare for the new payroll year.

Ans:
1. Update the new rates for CPP contributions, EI premiums and income tax for
the new payroll year.
2. Terminated employees should be removed from the active file.
3. Commissioned employees who have a federal TD1X form on file should be advised to
complete a new form before January 31st.
4. Determine the employees who will reach age 18 or 70 during the year.
5. Prepare a payroll calendar highlighting important events such as:
 remittance due dates
 pay dates
 statutory and organization holidays
 bank holidays
 pay period ending dates
 payroll input dates
 deadlines for receipt of payroll information from other departments
 payroll staff scheduled vacation dates

27. What does an organization need to do if they have 53 weekly pay periods in the year?

Ans: The weekly pay period Canada Pension Plan basic exemption should be
recalculated to make sure that the annual maximum does not exceed $3,500.00. The
payroll system should also be updated reflecting the new year exemption.