2023 PF2 Chapter 3 - Year End - Federal

Chapter
3
Chapter 3
Year-End – Federal
Learning Objectives:
Upon completion of this chapter, you should be able to:
1. Reconcile payroll registers to accounting ledgers and the Canada Revenue

Agency statements
2. Adjust estimate to actual for taxable benefits
3. Calculate and report pension adjustments
4. List reporting deadlines for year-end for the Canada Revenue Agency
5. Prepare year-end documentation for the Canada Revenue Agency:
• T4 slip
• T4 summary
• T4A slip
• T4A summary
6. List the procedures required to amend year-end documents
7. Calculate and compare pensionable and insurable withholdings with
compliance requirements
8. Differentiate the methods of year-end filing formats
9. List the items in the new year checklist
10. Calculate the Canada/Québec Pension Plan exemption for 27 bi-weekly or 53
weekly pay periods
Communication Objective:
Upon completion of this chapter, you should be able to produce an internal memo to
individuals involved in the budget process to inform them of the updated statutory
rates.
© National Payroll Institute – Payroll Fundamentals 2 3-1

Vs 17.0
Chapter 3
Chapter Contents
Chapter 3 ................................................................................................................................ 3-1
Introduction ........................................................................................................................ 3-3
Year-End Checklist ............................................................................................................ 3-4
Reconciliations ................................................................................................................... 3-6
Remittances .................................................................................................................... 3-6
Taxable Benefits .......................................................................................................... 3-10
Content Review............................................................................................................ 3-12
Review Questions ........................................................................................................ 3-13
Pension Plan Reporting .................................................................................................... 3-14
Pension Adjustments.................................................................................................... 3-14
Pension Adjustment Calculations ................................................................................ 3-17
Reporting Pension Contributions and Adjustments ..................................................... 3-22
Content Review............................................................................................................ 3-23
Completing the T4 Slip .................................................................................................... 3-27
Content Review............................................................................................................ 3-46
Completing the T4 Summary ....................................................................................... 3-52
Content Review............................................................................................................ 3-57
Completing the T4A Slip ................................................................................................. 3-59
Content Review............................................................................................................ 3-71
Completing the T4A Summary ........................................................................................ 3-74
Content Review............................................................................................................ 3-79
Pensionable and Insurable Earnings Review ................................................................... 3-81
Canada Pension Plan Deficiencies ............................................................................... 3-81
Employment Insurance Deficiencies ........................................................................... 3-82
Common Reporting Errors ........................................................................................... 3-83
Content Review............................................................................................................ 3-85
Filing Methods for Information Returns .......................................................................... 3-87
Content Review............................................................................................................ 3-92
Preparing for the New Year ............................................................................................. 3-94
Content Review............................................................................................................ 3-96
Chapter Review Questions and Answers ......................................................................... 3-98

Chapter 3
Introduction
Throughout the year, employers are required to withhold, remit and report the statutory
deductions taken from their employees’ pay. By the last day of February of the following
year, employers must report the amounts paid to employees and the statutory deductions
withheld on a federal T4 or T4A information slip. Copies of these slips are given to
employees to be used when they file their income tax returns. Copies are also provided to the
federal government for reconciliation of the employer’s remittances.
The material in Payroll Fundamentals 2 provides information relating to the year-end

process. This chapter provides an overview of the process as it relates to the filing
requirements of the federal government. The chapter on Year-End – Québec provides
information on the filing requirements for employers who have Québec payrolls. Other
chapters deal with the year-end reporting requirements for provincially administered
programs, such as health taxes and levies and workers’ compensation.

Chapter 3
Year-End Checklist
The following provides a listing of items that should be reviewed when preparing for year-
end. The checklist can be adapted to suit an organization’s specific requirements.
START-UP
 Create a year-end reference file to document the employer’s filing procedures.
 Download forms and guides required for year-end and new year filing from the CRA website.
 Start collecting and processing necessary payroll information before the final pay at year-end.
 Organize meetings with the Management Information System (MIS) department or service
provider, human resources (HR) department, payroll department, and accounting department (if
applicable) to ensure that requirements and expectations related to year-end are communicated
and fulfilled.
 Action items:
• Produce year-end reports
• Reset accumulators if necessary
• Send a notice to MIS or the payroll service provider, including new year requirements
or changes
• Change registered pension and RRSP limits as required
• Change WC maximum assessable earnings limits
PAYROLL AND ACCOUNTING PRACTICES

 Reconcile the payroll tax account regularly.
 Update employee records with any manual or cancelled cheques.
 Make adjustments to final pays and remittances.
 Double-check CPP and EI calculations to avoid a Pensionable and Insurance Earnings Review
(PIER) by using the CRA approved checklist.
 Validate social insurance numbers (SINs).
 Carry forward accrual balances to the new year for loan balances, garnishments, time owed,
and vacation accruals.
 Make necessary adjustments for workers’ compensation awards reimbursed to the organization
and ensure proper T4 slip reporting.
 Determine if any miscellaneous payments through accounts payable need to be entered into
payroll.
 Review and complete the following concerning taxable benefits:
• Will the benefits be reported under the correct codes on the tax slips?
• Are final adjustments necessary (for example, company automobiles)?

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 Review the following pension adjustment (PA) matters:

• Calculation requirements
• Any necessary adjustments to pensionable earnings based on the company pension
plan criteria
• Actuarial study/annual report
• Confirmation of deadlines for information required from the HR/benefits department or
actuary
• Reporting of taxable refunds, if applicable
 Check the following year-end, payroll, and accounting requirements:
• Accruals to close books
• Reconciliations before final payroll output or company fiscal year-end
• Earnings charged to proper accounts and cost centers
• Union dues statements signed by the union(s) and company official(s) and reported by
the employer on tax slips
• Appropriate payroll accounts reconciled
GUIDES, PENALTIES AND PROCEDURES

 Determine the required filing method: paper, T4 web forms or electronic filing.
 Know the deadlines and penalties for non-compliance. Determine the latest day to amend
payroll records to avoid late penalty charges and additional interest charges from the CRA.
 Review internal procedures for cancelling or amending slips and summaries if required:
• Determine if any manual T4 or T4A slips are required
• Correct erroneous slips
• Make changes
• Adjust summary totals
COMMUNICATIONS
 Notify finance/HR and internal/external auditors about taxation rules and requirements.
 Send a notice to all employees, timekeepers, union executives, and department managers listing
final year-end payroll schedules and deadlines to submit final payment information.
 Send a reminder notice to all employees to file new TD1s (federal and provincial/territorial) if
their situation has changed.
 Send a memo to all commission employees requesting a new TD1X by January 31.
 Review next year’s payroll schedule to determine if there are any conflicts in dates for
processing payroll or paydays (statutory holidays).
 If bi-weekly or weekly payroll, are there 27 or 53 pay periods next year?
• If yes, how will the annual CPP pay period exemption be handled?
• Are any taxable benefits or deductions affected?

Chapter 3
Reconciliations
The course material on federal remittances discussed the importance of reconciling, on an
ongoing basis, monies remitted to the Canada Revenue Agency (CRA) with the amounts the
CRA reports having received. In this section of the chapter, the focus will be on reconciling
federal government remittances and taxable benefits.
Remittances
Throughout the year, every organization remits to the Canada Revenue Agency (CRA):
• source deductions withheld from employees for:

○ Canada Pension Plan (CPP) contributions
○ Employment Insurance (EI) premiums
○ Income tax
• employer’s portion of:
○ Canada Pension Plan (CPP)
○ Employment Insurance (EI)
As discussed in the chapter on federal remittances, an employer can use a spreadsheet to

track their remittances throughout the year.
The CRA reports the remittances received from the employer using the Statement of Account
for Current Source Deductions – PD7A. Reconciling these statements regularly with the
totals recorded on the remittance tracking spreadsheet helps the employer identify and correct
any discrepancies between what was deducted and remitted and what was reported as
received by the CRA. If there are any discrepancies, it is much easier to correct them as they
occur; this reduces the extra confusion and stress at the end of the year.
Regularly reconciling source deduction accounts during the year will assist with the year-end
filing process, as it is only after the payroll is reconciled and balanced for the year that the T4
and T4A information slips and summaries can be prepared.
If there are no adjustments after the last pay for the taxation year is processed, the totals on
the remittance spreadsheet, which have been reconciled with the totals on the PD7A, and the
totals of the statutory deductions on the T4 information slips, along with the employer’s
portion for CPP contributions and EI premiums, will balance. There would be no amount
owing to the CRA, nor would any refund be due to the organization.

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Often, however, some adjustments must be made to individual payroll records before correct
information slips can be produced. If the adjustments are done after the last payroll for the
year has been produced, but before the final remittance is due, then the remittance for any
statutory withholdings on the adjustments can be made by the due date for the final
remittance for the year. No interest and penalties would be incurred as the remittance would
be made on time. If the organization uses a service provider, it is important to determine if
the service provider will be making the remittances resulting from the adjustments or if the
organization must make the payment to the CRA itself.
If adjustments are done after the final remittance due date for the year, any amounts due to
the CRA may attract interest and penalty costs, except for those adjustments that meet the
rules for Payment on Filing.
Depending on the ability of the payroll system used, when adjustments to an employee’s
year-to-date totals are required after the last pay of the year has been processed, journal
entries may be required to enter the information into the organization’s general ledger. In
some systems, adjustments made during the year are incorporated into the totals that are
posted to the general ledger when the payroll entries are posted. However, year-end
adjustments are often done after the last payroll for the year has been processed. These
adjustments may need to be posted manually to the general ledger.
Example:
In mid-January of the following year, it was discovered that Marty Caplin received a
manual cheque for a bonus in October that was not recorded in the payroll.
The information on the cheque is:
Gross Earnings $4,755.00

Canada Pension Plan (CPP) $259.15*
Employment Insurance (EI) $75.13*
Income Tax $1,385.00*
Net Pay $3,035.72
The year-to-date totals for Marty can be corrected through a year-end adjustment to the
payroll records. If the system does not generate any accounting entries for this type of
processing, journal entries must be manually prepared to record the cheque.
The statutory deductions that were withheld, along with the employer’s portion, must be
remitted to the CRA.
*The withholding rates used in the examples are not necessarily those of the current year.

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Journal entry # 1240

DATE ACCOUNT NAME DEBIT CREDIT
December 31, Salaries and wages expense 4,755.00
20XX Canada Pension Plan payable 259.15
Employment Insurance payable 75.13
Income tax payable 1,385.00
Salaries and wages payable (net pay) 3,035.72
Total 4,755.00 4,755.00
To record cheque #1755 – October, 20XX
Journal entry # 1241

DATE ACCOUNT NAME DEBIT CREDIT
December 31, Canada Pension Plan expense 259.15
20XX Employment Insurance expense 105.18
Canada Pension Plan payable 259.15
Employment Insurance payable 105.18
Total 364.33 364.33
To record employer’s portion of Canada Pension Plan & Employment Insurance for
cheque #1755 October, 20XX
In many organizations, the previous two journal entries would have been done as a single
journal entry.
Note:
Any interest or penalties on accounts that remain unpaid or unsettled continue to accrue
further interest charges, which needlessly increase employer costs.
Whenever any adjustments are made to the payroll records, the remittance spreadsheet must
always be adjusted to reflect the changes. The totals on the spreadsheet must be the same as
the totals for the organization’s T4 or T4A slips.

Chapter 3
T4 and T4A Reconciliations

The accumulated total on the PD7A has a credit balance throughout the year. As each
payment is remitted to the CRA during the year, it is credited to the source deductions
account. When the T4 and T4A information slips are filed at the end of the year, the total of
the statutory deductions reported on the slips and the employer’s portion of CPP
contributions and EI premiums are debited to the account. If the credit balance at year-end
does not equal the total of the amounts on the information slips filed, then the balance on the
account will be carried forward. The PD7A will not show a true balance for the current year
and, therefore, not balance to the information slips.
Example:
Inside Designs, a company in Hamilton, Ontario, is preparing the current year's T4 slips and
comparing the following totals:
Credit balance on the current year PD7A ($437,475.00)

T4 and company portion totals $439,000.00
Balance $ 1,525.00
The company made bonus payments after the final pay for the year was processed; however,
the income tax withheld on the bonuses was not remitted to the CRA.
If the difference is not paid when the T4 slips are submitted, the CRA account will have a
debit balance for the year of $1,525.00. This balance will carry forward and will be reflected
in the balance shown on the PD7A in the next year, as the balance on the PD7A is an
accumulated total, not just the balance for a single year.
With the $1,525.00 relating to the previous year carried forward in the PD7A balance, the
PD7A will not balance to the remittance spreadsheet for the following year.
In the early part of the calendar year, the balance on the PD7A includes:
• all outstanding amounts plus any interest owing from previous years
• remittances for the previous taxation year that relate to the tax slips to be filed by the
end of February
• remittances for the current year
If the PD7A contains incorrect information, the employer will want to resolve the situation
with the CRA so that the balance shown is correct going forward.
The general ledger accounts should also be reconciled to the totals on the PD7A statements
to ensure the organization’s expenses for employer portions of CPP contributions and EI
premiums are accurately reported in the financial statements.

Chapter 3
Reconcile Remittances to Employee Year-to-Date Totals

In addition to reconciling the remittances to the source deductions account, the remittances
must also be reconciled to the employees’ year-to-date totals.
Most payroll systems can create a report that breaks down the year-to-date totals by
employee and by the overall payroll as follows:
• gross taxable income

• Canada Pension Plan pensionable earnings
• Employment Insurance insurable earnings
• income tax
• Canada Pension Plan contributions
• Employment Insurance premiums
• provincial health care levies
• workers’ compensation assessable earnings/year-end adjustments
This information is usually generated after the final pay period of the year. Most payroll
systems will provide a set of these figures as a trial balance before year-end and a final report
as part of their year-end procedures.
Taxable Benefits
The Canada Revenue Agency requires that taxable benefits be subject to source deductions
as they are received or enjoyed by the employee; therefore, the value of the taxable benefit
should be included in an employee’s income on a pay period basis. For example, if the
employer pays monthly premiums on behalf of their employees for group term life insurance,
the amount of the premium, plus any applicable taxes, should be included in the employee's
income each pay period.
Processing taxable benefits on a pay period basis helps reduce errors in the calculation of
Canada Pension Plan contributions and Employment Insurance premiums (certain benefits),
which can cause the CRA to issue a Pensionable and Insurable Earnings Review (PIER). The
PIER will be discussed later in this chapter.
Taxable Benefit Adjustments

There may be situations where, even though the taxable benefits have been entered on a pay
period basis, a final adjustment based on actual values must be entered at year-end. This
entry should be done before the last payroll is processed for the tax year.

Chapter 3
Example:
Noreen Jonah has a company-owned automobile that is driven throughout the year for both
business and personal use. On each pay period during the year, an estimated taxable benefit
amount is included in income based on the estimated personal kilometres use of the
automobile. At the end of the year, the annual taxable benefit amount is calculated using the
actual personal kilometres driven, and any required adjustment is made.
Source deductions related to these adjustments should be included in the remittance for the
last pay period of the year. Any remittances not made by the due date for the last payroll of
the tax year may be considered late. Interest and penalty charges may be assessed even if a
payment is sent with the year-end reporting slips and summaries. The exception would be
any adjustments that are eligible under Payment on Filing rules.
Update Employee Records

Employee year-to-date totals should be updated as soon as possible when a manual cheque is
issued or when direct deposits are reversed or returned by a financial institution. It is easier to
update the employee’s records if adjustments are entered as they occur rather than
accumulating them for entry at year-end.
If the adjustment is not made when the manual cheque is issued or the direct deposit
reversed, the employee may be in a situation where they have either over- or under-
contributed to the Canada Pension Plan or Employment Insurance.
Example:
Cynthia Makhan was issued a manual bonus cheque for $1,000.00 in May. The cheque
details are as follows:
Bonus $1,000.00
Canada Pension Plan contribution 59.50
Employment Insurance premium 16.30
Income tax 295.00
$ 629.20
The cheque was not entered into the payroll system until December, by which time the
payroll system had calculated and withheld the maximum for CPP contributions and EI
premiums for the year.
When the manual cheque information is entered into the system, Cynthia will have been
over-deducted for CPP contributions and EI premiums and will have to be reimbursed.

Chapter 3
Content Review
• Reconciling the PD7A statements regularly with the totals recorded on the remittance
tracking spreadsheet helps the employer identify and correct any discrepancies
between what was deducted and remitted and what was reported as received by the
CRA.
• If payroll adjustments are done after the last payroll for the year has been produced,
but before the final remittance is due, then the remittance for any statutory
withholdings on the adjustments can be included with the remittance for the final pay
of the year.
• If adjustments are done after the final remittance due date for the year, any amounts
due to the CRA may attract interest and penalty costs.
• When adjustments to an employee’s year-to-date totals are required after the last pay
of the year has been processed, journal entries may be required to enter the
information in the organization’s general ledger.
• As each payment is remitted to the Canada Revenue Agency during the year, it is
credited to the source deductions account. When the T4 and T4A information slips
are filed at the end of the year, the total of the statutory deductions reported on the
slips, and the employer’s portion of Canada Pension Plan (CPP) and Employment
Insurance (EI), is debited to the account.
• The general ledger accounts should also be reconciled to the totals on the PD7A
Statements to ensure the organization’s expenses for employer portions of CPP
contributions and EI premiums are accurately reported in the financial statements.
• The Canada Revenue Agency requires that taxable benefits be subject to source
deductions as they are received or enjoyed by the employee; therefore, the value of
the taxable benefit should be included in an employee’s income on a pay period basis.
• Any remittances not made by the due date for the last payroll of the tax year may be
considered late. Interest and penalty charges may be assessed even if a payment is
sent with the year-end reporting slips and summaries.
• Employee year-to-date totals should be updated as soon as possible when a manual
cheque is issued or when direct deposits are reversed or returned by a financial
institution.

Chapter 3
Review Questions
1. What is the purpose of doing a reconciliation of the Canada Revenue Agency
remittances?
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?

Chapter 3
Pension Plan Reporting

Organizations that have a registered pension plan or a deferred profit sharing plan in place
are required to report an employee’s pension contributions as well as any pension
adjustments (PAs) on the employee’s T4 information slip.
Pension Adjustments
A pension adjustment (PA) is the measure of the benefit that an individual earns in a year in a
regular registered pension plan (RPP) or a deferred profit sharing plan (DPSP) set up by the
employer. The CRA terms these benefits “the member’s total pension credits.” As most
individuals participate in only one RPP or DPSP, their pension credit will also be their
pension adjustment.
The pension adjustment reduces the amount an individual can contribute to their Registered
Retirement Savings Plan (RRSP) in the following year. The larger the amount of the PA, the
smaller the RRSP contribution room available.
Pension Adjustment Glossary

The following terms are provided to calculate pension adjustments.
Benefit Entitlement
The benefit entitlement is the portion of a member’s pension that is considered to have
accrued during the year. It applies to defined benefit pension plans only. Generally, the
benefit entitlement is calculated by multiplying the plan’s formula for the lifetime benefit by
the member’s pensionable earnings for the year.
For a defined benefit pension plan where the member’s benefit is based on a percentage of
final average earnings or career average earnings, the benefit entitlement is calculated by
multiplying the pensionable earnings by the percentage stated in the plan document.
Example:
Defined Benefit Final Average Earnings Pension Plan
The defined benefit pension plan document states that the pension benefit will be 1.5% of the
member’s final average earnings. This member had final average earnings of $30,000.00.
Benefit entitlement = Final average earnings x benefit percentage rate

= $30,000.00 x 1.5%
= $450.00

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Example:
Defined Benefit Career Average Earnings Pension Plan
The defined benefit pension plan document states that the pension benefit will be 2.0% of the
member’s career average earnings. This member had career average earnings of $75,900.00.
Benefit entitlement = Career average earnings x benefit percentage rate

= $75,900.00 x 2%
= $1,518.00
For a flat benefit plan, the benefit entitlement is the year’s flat benefit amount or the month’s
flat benefit amount multiplied by the number of months accrued in the year.
Example:
Defined Benefit Flat Benefit Pension Plan
The pension plan states that the employee earns a benefit of $22.00 per month of service.
The employee participated in the pension plan for the full 12 months of the year.
Benefit entitlement = Flat benefit amount x number of months

= $22.00 x 12
= $264.00
Benefit Entitlement Limit

Each year the CRA establishes a maximum benefit entitlement amount. The benefit
entitlement could also be affected by an overriding provision in the pension plan that limits
the maximum amount of pension that can be paid. For some plans, this overriding provision
is more restrictive than the above limits outlined in the Income Tax Act.
Note:
For this chapter, the provisions will not be discussed; these will be part of a formula in a
specific plan.

Chapter 3
Pensionable Earnings
Pensionable earnings are the types of earnings, as defined in the plan’s text, which can be
used to calculate pension benefits earned. For example, bonuses are employment income and
pensionable for Canada Pension Plan purposes, but they may not be considered pensionable
as defined by the plan text. Pensionable earnings for the registered pension plan (RPP)
calculations are often just basic earnings, and any ancillary employment income is not
included.
Reallocated Forfeitures
A forfeited amount is an amount a member ceased to have rights to under a deferred profit
sharing plan (DPSP) or a defined contribution plan (DC). Amounts are often forfeited when
members terminate their employment before the employer contributions are vested. If these
forfeited amounts are reallocated to the remaining plan members, they are included in the
pension credit of the remaining members.
Pension Credit
A pension credit reflects the value of the benefit that a member earns under a deferred profit
sharing plan, a defined contribution plan, or a defined benefit provision of an RPP plan. An
individual’s pension adjustment is the total of their pension credits.
Pension Adjustment Formula

The pension adjustment formula is used to calculate a pension credit for a defined benefit
pension plan. The benefit entitlement is multiplied by 9, and then $600.00 is subtracted from
the result. The pension adjustment is always rounded to the nearest whole dollar. The pension
adjustment is reported as nil if the calculation results in a negative amount.
Pension Adjustment = (9 x benefit entitlement) - $600.00
Factor of 9
The limit on contributions for retirement savings is set at 18% of earned income. Under a
defined benefit pension plan, a member may earn benefits at a maximum rate of 2% of
compensation. To approximate the present value of the benefit earned, the benefit earned is
multiplied by 9. The value factor of 9 was chosen for its uniformity since 9 times 2% equals
18%.
$600.00 offset
The $600.00 offset is based on compensation for variances in ancillary benefits that occur
from plan to plan. Ancillary benefits include inflation protection, early retirement, survivor
and disability benefits.
Note:
If recalculating pension credits for years between 1990 and 1996 inclusive, a $1,000.00 offset
must be used.

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Vesting
The term vesting means that a member of a pension plan has become entitled to the full or a
partial amount of the employer’s contribution to the pension plan.
Pension Adjustment Calculations

Pension Adjustment (PA) limits and the methods of calculating the adjustments differ
depending on the type of pension plan. The following table shows the calculation formula for
each type of plan:
Exhibit 3-1
FORMULA FOR CALCULATING THE
TYPE OF PLAN
PENSION ADJUSTMENT
Defined Contribution Pension Plan (or Employer contributions + employee
Money Purchase) contributions + reallocated forfeitures +
additional voluntary contributions (AVCs)*
Defined Benefit Pension Plan (9 x benefit entitlement) - $600
Deferred Profit Sharing Plan Employer contribution + reallocated forfeitures
Combination Plan Total of all pension credits for each component
*Additional Voluntary Contributions (AVCs):

Some plans allow employees to make extra contributions to increase the amount of the pension they
would otherwise receive from the plan. The limits of the AVC are defined in the individual pension
plan. These additional contributions have no direct effect on the employer’s cost.
The following examples illustrate pension adjustment (PA) calculations for different types of
pension plans. For simplification purposes, it is assumed that the employee has worked the
entire year in full-time employment (except where stated otherwise), did not receive any
bonuses or reinstatement pay adjustments, and was employed within the same pension plan
of the same employer for the full year.
Note:
The final calculation of the pension adjustment is always rounded to the nearest whole dollar.
If the amount is halfway between two dollar amounts (e.g., $XXX.50), the pension
adjustment is rounded to the next higher dollar.
Defined Benefit Pension Plan

The pension adjustment calculation for a defined benefit pension plan is:
(9 x benefit entitlement) - $600.00
The first step in calculating the pension adjustment is to determine the benefit entitlement.

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For a flat benefit pension plan, multiply the flat benefit amount by the number of months in a
full year (12), and then, if the member worked less than 12 months, by the fraction that
represents the months the member did work. For example, if the employee only worked for 6
months, the fraction of 6/12 would be applied to the benefit entitlement amount.
Example:
Defined Benefit - Flat Benefit Plan
The employee worked 12 months and earned a benefit of $15.00 per month of service.

= $15.00 x 12
= $180.00
Pension Adjustment:
(9 x Benefit Entitlement) - $600.00
( 9 X $180.00 ) - $600.00 = $1,020.00
Example:
Defined Benefit - Flat Benefit Plan
The employee worked six months and earned a benefit of $25.75 per month of service.
Benefit entitlement = Flat benefit amount x number of months in the year x fraction
= $25.75 x 12 x 6/12
= $154.50
Pension Adjustment:
( 9 X $154.50 ) - $600.00 = $ 790.50
The Pension Adjustment reported will be rounded to the nearest whole dollar, $791.00.

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In a final average earnings defined benefit pension plan, the benefit entitlement is determined
by multiplying the pensionable earnings by the pension benefit rate. The benefit entitlement
is then used in the pension adjustment formula.
Example:
Defined Benefit - Final Average Earnings Pension Plan
The employee has a pension benefit of 1.5% of the final average earnings. The final
average earnings for the year are $40,000.00.

= $40,000.00 x 1.5%
= $600.00
Pension Adjustment:
( 9 x $600.00 ) - $600.00 = $4,800.00
Note:
Do not exceed the maximum benefit entitlement amount for the year.
An example of where the maximum benefit entitlement must be considered is shown below.
Example:
Defined Benefit - Final Average Earnings Pension Plan
The employee has a pension benefit of 1.5% of the final average earnings. The final
average earnings for the year are $250,000.00

= $250,000.00 x 1.5%
= $3,750.00
The annual maximum benefit entitlement of $3,506.67 will be used to calculate the
pension adjustment.
Pension Adjustment:
( 9 x $3,506.67 ) - $600.00 = $30,960.03
Rounded $30,960.00

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Similar to a final average earnings plan, in a career average earnings defined benefit pension
plan, the benefit entitlement is determined by multiplying the pensionable earnings by the
pension benefit rate. The benefit entitlement is then used in the pension adjustment formula.
Example:
Defined Benefit - Career Average Earnings Pension Plan
The pension benefit is 1% of the employee’s career average earnings; the employee’s
pensionable career average earnings are $55,000.00.

= $55,000.00 x 1%
= $550.00
Pension Adjustment:
( 9 x $550.00 ) - $600.00 = $4,350.00
In some defined benefit pension plans, the calculation of the benefit entitlement takes into
account the amount that the member will receive in Canada Pension Plan benefits. The
formula for calculating the benefit entitlement for an integrated plan such as this includes the
Year’s Maximum Pensionable Earnings (YMPE).
Example:
Defined Benefit - Integrated Pension Plan
To illustrate this calculation, the current YMPE is used as the 3-year average of the
YMPE.
The pension formula for this organization’s defined benefit integrated pension plan is:
• 1.5% of the average best 5 years of earnings up to the 3-year average of the YMPE
plus
• 2% of the average best 5 years of earnings that are above the 3-year average of the
YMPE
Plan member’s pensionable earnings $75,000.00

Year’s Maximum Pensionable Earnings $66,600.00
Earnings above YMPE $8,400.00

Chapter 3
Benefit Entitlement 1.5% x $66,600.00 = $ 999.00

2.0% x $8,400.00 = $ 168.00
= $1,167.00
Pension Adjustment:
( 9 x $1,167.00 ) - $600.00 = $9,903.00
Defined Contribution Pension Plan

In a defined contribution pension plan, the pension adjustment is calculated by totalling the
employer and employee contributions plus any reallocated forfeitures and additional
voluntary contributions. There is no $600.00 offset in the pension adjustment calculation for
defined contribution plans.
Example:
Defined Contribution Pension Plan
An employee contributes 3% of the annual earnings of $35,000.00 to the pension plan. In this
plan, the company matches the employee’s contributions. The pension adjustment is
calculated as:
Pension adjustment = Employer contributions + employee contributions

+ reallocated forfeitures + additional voluntary contributions
Employee contribution = $35,000.00 x 3%

= $1,050.00
Employer contribution = $1,050.00
Pension adjustment = $1,050.00 + $1,050.00

= $2,100.00

Chapter 3
The following table provides the annual plan limits for the previous and current years.
Plan Limits
2022 2023
Defined Contribution (DC) or Money Purchase RPP $30,780.00 $31,560.00
Defined Benefit (DB) RPP
• Maximum Benefit Entitlement $3,420.00 $3,506.67
• Pension Adjustment $30,180.00 $30,960.00
Deferred Profit Sharing Plan (DPSP) $15,390.00 $15,780.00
Registered Retirement Savings Plan (RRSP) $29,210.00 $30,780.00
Reporting Pension Contributions and

Adjustments
The following are some general year-end reporting guidelines employers should follow when
reporting pension contributions and pension adjustments (PAs).
• Employee contributions to a registered pension plan (RPP) are tax deductible; they
are reported in box 20 on the T4 slip.
• Employee and employer contributions to a defined contribution pension plan are part
of the PA that is reported in box 52.
• PAs are reported on the T4 slip; however, under certain conditions, the PA may be
reported on the T4A slip.
• Employee contributions to a Registered Retirement Savings Plan (RRSP) are not
reported by payroll; the employee will receive a tax receipt from their financial
institution.
• Employer contributions to an employee’s RRSP are reported on the T4 slip in box 14
and in the Other Information area using Code 40 as they are a cash taxable benefit,
subject to CPP contributions and EI premiums.

Chapter 3
Content Review
• Organizations that have a registered pension plan or a deferred profit sharing plan in
place are required to report an employee’s pension contributions as well as any
pension adjustments on the employee’s T4 information slip.
• A pension adjustment is the measure of the benefit that an individual earns in a year
in a regular registered pension plan (RPP) or a deferred profit sharing plan (DPSP) set
up by the employer.
• The benefit entitlement is the portion of a member’s pension that is considered to
have accrued during the year.
• For a defined benefit pension plan where the member’s benefit is based on a
percentage of final average earnings or career average earnings, the benefit
entitlement is calculated by multiplying the pensionable earnings by the percentage
stated in the plan document.
• For a flat benefit defined benefit pension plan, the benefit entitlement is the year’s flat
benefit amount or the month’s flat benefit amount multiplied by the number of
months accrued in the year.
• Pensionable earnings are the types of earnings, as defined in the plan’s text, which
can be used to calculate pension benefits earned.
• Employee contributions to a registered pension plan (RPP) are tax deductible; they
are reported in box 20 on the T4 slip
• Employee and employer contributions to a defined contribution pension plan are part
of the PA that is reported in box 52
• Employee contributions to a Registered Retirement Savings Plan (RRSP) are not
reported by payroll; the employee will receive a tax receipt from their financial
institution.
• Employer contributions to an employee’s RRSP are reported on the T4 slip in box 14
and in the Other Information area using Code 40 as they are a cash taxable benefit,
subject to CPP contributions and EI premiums.

Chapter 3
Review Questions
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
PENSION ADJUSTMENT
Combination Plan
Defined Contribution Pension

Plan (or Money Purchase)
Deferred Profit Sharing Plan
Defined Benefit Pension Plan

Chapter 3
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.

Chapter 3
c. Laurence Lamont is a member of a defined benefit pension plan that has a pension
benefit of 2% of the career average earnings. The career average earnings are
$73,500.00.
d. Joshua Anthony is a member of a defined benefit integrated pension plan with the
following formula:
• 2% of the average best 5 years of earnings up to the 3-year average of the

YMPE
plus
• 4% of the average best 5 years of earnings that are above the 3-year average of
the YMPE
For the current year’s pension adjustment calculation, Joshua’s average earnings were
$80,000.00; the 3-year average of the YMPE is $66,600.00.
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

Chapter 3
Completing the T4 Slip

The T4 – Statement of Remuneration Paid is commonly referred to as the T4 slip. This form
must be completed for each person who received remuneration from employment, where:
• statutory deductions for Canada/Québec Pension Plan (C/QPP) contributions,

Employment Insurance (EI) premiums, Québec Parental Insurance Plan (QPIP)
premiums and income tax were required
• the remuneration was $500 or more
• there is a pension adjustment (PA) amount for employees who accrued a benefit for
the year under a registered pension plan (RPP) or deferred profit sharing plan (DPSP)
• any amount of group term life insurance was provided
• any amount was provided to employees, former employees and non-resident
employees with security options benefits
Note:
Income is reported on a tax slip for the year during which it was paid, regardless of when the
income was earned or the services were performed.
The T4 slip summarizes an employee’s remuneration paid and statutory deductions withheld
for a given taxation year. The form must be completed and issued by the last day of February
of the following year. The following is a copy of the T4 slip.

Chapter 3

Chapter 3
General Guidelines
There are general guidelines that should be followed when completing the T4 slips:
• the slips should be completed in alphabetical order by employee surname

• make sure the Social Insurance Number entered on the T4 slip is correct
• employees who worked in more than one province during the year must have a
separate T4 slip for earnings and statutory deductions for each province in which they
were employed
• employees whose remittances were made under different CRA payroll account
numbers must have a separate T4 slip for each number
• employees who require multiple T4 slips should have their pension adjustment
allocated based on the pensionable service or earnings reported on each slip; if this is
not possible, the pension adjustment may be reported on one slip
• all taxable remuneration, including salary, wages, retiring allowances, taxable
allowances and benefits, and any other taxable amounts paid or provided during the
year, must be reported
• all amounts are reported in Canadian dollars and cents; however, the pension
adjustment is reported in Canadian dollars only
• no negative amounts are to be reported on the slips
• the headings and identification numbers of the boxes must not be changed
• do not print or type the dollar sign ($), hyphens or dashes
• leave the box blank if there is no amount to report; do not enter “nil”

Chapter 3
Box by Box Completion of the T4 Slip

The following table lists each section/box of the T4 slip and the information to be entered.
Exhibit 3-2
# BOX INFORMATION REQUIRED
-- Employer’s name Enter the employer’s name as it appears on the organization’s
PD7A statement from the CRA.
-- Employee’s name Print or type the employee’s surname followed by first name and
and address initial, all in capital letters. If the employee has more than one
initial, enter the employee’s first name followed by the initials in
the “First Name” box. If entering only initials, enter them at the
beginning of the “First Name” box. The employee’s name reported
on the T4 should match the name on the Social Insurance Number
documentation. Do not enter titles. Enter the complete address,
including province, territory or US state, Canadian postal code or
U.S. zip code, and country.
-- Year Enter the four digits of the calendar year in which you paid the
remuneration to the employee.
10 Province of Enter the province or territory in which the employee was required
employment to report for work at an establishment of the employer. Where there
is no establishment in that province, enter the province from which
the employee was paid. Acceptable abbreviations are as follows:
AB Alberta ON Ontario
BC British Columbia PE Prince Edward Island
NU Nunavut QC Québec
MB Manitoba SK Saskatchewan
NB New Brunswick YT Yukon
NL Newfoundland and Labrador US United States
NS Nova Scotia ZZ Other
NT Northwest Territories
Note:
ZZ - Other is for employees who worked in a country other than
Canada or the U.S. or worked in Canada beyond the limits of a
province or territory, such as on an offshore drilling platform.
12 Social Insurance Enter the number shown on the employee’s Social Insurance
Number Number (SIN) documentation. This number must be correctly
reported on the T4.
There is a penalty of $100 per occurrence for failure to make a
reasonable effort to get a SIN. If you cannot obtain a SIN from the
employee, file your return without the SIN.
If the employee has not provided a SIN, enter nine zeros.
If an employee had a SIN beginning with a ‘9’ and later in the tax
year received a permanent SIN, issue a single T4 for all income
using the permanent SIN.

Chapter 3

14 Employment Report the total income before any deductions. Include all salary,
income wages, bonuses, wages in lieu of notice, vacation pay, tips and
gratuities, honorariums, directors’ fees, commissions, taxable
allowances and the value of taxable benefits (including any taxable
PST/GST/QST/HST component), top-ups that do not qualify as
supplementary unemployment benefit (SUB) plans (for example,
maternity, parental and compassionate care) and any other
payments derived from employment during the year. Include these
in box 14 even if they appear separately in the “other information”
area of the slip.
Include payments out of an employee benefit plan (EBP) and

amounts a trustee allocated under an employee trust, even if the
amount is to be paid later. For more information, see Interpretation
Bulletins IT-502 – Employee Benefit Plans and Employee Trusts
and IT-502 SR – Special Release.
Employee’s Enter the amount deducted from the employee for contributions to
16 CPP contributions Canada or Québec Pension Plan. Make the entry under “Canada
17 QPP contributions Pension Plan” (Box 16) or “Québec Pension Plan” (Box 17),
depending on the province of employment. Leave both areas blank
if the employee did not contribute to either plan.
Do not report the employer’s share of C/QPP contributions on the

T4 slip.
18 Employee’s EI Enter the amount deducted from the employee for EI premiums.
premiums Leave this box blank if no premiums were deducted.
Do not report the employer’s share of EI premiums on the T4 slip.

20 Registered pension Enter the total amount contributed by the employee to the
plan (RPP) employer’s registered pension plan. Leave this box blank if the
contributions employee did not contribute to the plan.
If the total amount reported includes contributions for current and
past services that relate to 1989 or earlier years, enter in the “other
information” area the following codes along with the corresponding
amount:
• Code 74 for past service contributions while the employee
was a contributor,
• Code 75 for past service contributions while the employee
was not a contributor
To determine if the contributions are considered while a contributor
or while not a contributor, see Interpretation Bulletin IT-167R6,
Registered Pension Plans − Employee Contributions.
Include any instalment interest charged as a finance charge to buy
back pensionable service in Box 20.

Chapter 3

Do not include either employee or employer contributions to an
RRSP in Box 20.
22 Income tax Enter the combined federal and provincial/territorial (except for
deducted Québec) income taxes deducted from the employee during the year.
Leave this box blank if no income tax was deducted. Québec
provincial income tax is not reported on the T4 slip.
Note:
Do not include any amounts withheld under the authority of a
“garnishee” or “requirement to pay” which applies to an
employee’s previously assessed income tax arrears.
24 EI insurable Box 24 must always be completed. Enter the total amount used to
earnings calculate the employee's EI premiums up to the maximum insurable
earnings. If there are no insurable earnings, enter “0.00” in Box 24.
Do not include the unpaid portion of any earnings from insurable

employment that you did not pay because of your bankruptcy,
receivership or non-payment of remuneration for which the
employee has filed a complaint with the federal or provincial labour
authorities.
26 CPP/QPP Box 26 must always be completed. Enter the amount of
pensionable pensionable earnings used to calculate CPP contributions; up to the
earnings annual maximum earnings. If there are no pensionable earnings,
enter “0.00” in Box 26.
Indian – Report
the pensionable While the NPI recognizes that many
earnings on which First Nations or indigenous people in
you calculated Canada prefer using terms other than
CPP contributions. Indian or Native to describe themselves,
due to the implications and legal
Québec Pension meaning under the Indian Act, some of
Plan: our materials use these terms for
Complete the box compliance and educational purposes.
if the employee is
subject to Québec Pension Plan contributions. If the maximum QPP
pensionable earnings have been reached, enter that amount even if
it is greater than the employment earnings in Box 14, “Employment
income”. This would occur when the employee received a taxable
benefit for employer-paid premiums for medical/dental coverage.
The benefit is not included in Box 14 but will be included in Box
26, as it is pensionable under the Québec Pension Plan.
Note:
A taxable benefit provided to an employee in a pay period where no
cash remuneration is paid is pensionable, although no CPP
contributions are required. Report the value in Box 26.

Chapter 3

28 Exempt (CPP-QPP, Enter an “X” under “CPP-QPP” only if the earnings were exempt from
EI, and PPIP) CPP or QPP for the entire year. Do not complete the “CPP-QPP” part
of this box if an amount was entered in Box 16, 17 or 26.
Enter an “X” under “EI” only if the entire earnings were exempt or
not eligible for the entire year. Do not complete the “EI” part of this
box if an amount was entered in Box 18 or Box 24.
Enter an “X” under “PPIP” (Provincial Parental Insurance Plan)
only if the earnings were exempt from PPIP for the entire year. Do
not complete the “PPIP” part of this box if an amount was entered
in Box 55 or Box 56. Currently, this would only be used for
employees in the province of Québec.
The Canada Revenue Agency has used the term ‘Provincial
Parental Insurance Plan’ in the event that other provinces follow
Québec’s lead and institute a plan similar to Québec’s Parental
Insurance Plan.
29 Employment Code Enter the appropriate code in this box if one of the following
situations applies. Otherwise, leave the box blank.
11- Placement agency – self-employed (note 2)
12- Taxi driver or driver of other passenger-carrying vehicles
(note 2)
13- Barber or hairdresser (note 2)
14- Withdrawal from a prescribed salary deferral arrangement
plan
15- Seasonal Agricultural Workers Program
16- Detached employee - Social Security Agreement (note 1)
17- Self-Employed Fishers (Box 14 not completed) (note 2)
Note 1:
Box 14 is left blank, provided no other type of income is reported.
Boxes 16 and 26 are completed with the amounts. Enter “0” in
Boxes 18 and 24 and leave the EI exempt box blank.
Note 2:
Box 14 should not be completed if using employment Codes 11,
12, 13 or 17.
44 Union dues Enter the amount deducted from the employee for union dues.
Include amounts paid to a parity or advisory committee that qualify
for a deduction. Do not include strike pay the union paid to union
members.
Only use this box if the employer and the union have agreed that
the union will not issue receipts directly to employees. In this case,
the T4 information return must be accompanied by a “Certificate of
Agreement” verifying that the union will not be issuing receipts. If
filing electronically, keep the certificate on file as the CRA may
request to see it.

Chapter 3

46 Charitable Enter the amount deducted from the employee’s earnings for
donations charitable donations to registered charities in Canada.
Only use this box if the employer and charitable organization have
agreed that the charitable organization will not be issuing a receipt.
50 RPP or DPSP Enter the 7-digit registration number issued by the Canada Revenue
registration number Agency for the:
• registered pension plan

• deferred profit sharing plan, or
• unregistered foreign plan
If the employee was a member of a pension plan at any time during

the year, even if contributions were made by the employer.
If contributions on behalf of the employee were made to more than

one plan, only enter the number of the plan under which the
employee accrued the largest pension adjustment amount. Where
the employer is required to make contributions to union pension
funds, the union’s plan number must be included.
52 Pension adjustment Enter the amount of the pension adjustment (PA) the employee
earned during the year. An employer who has to prepare more than
one T4 slip for an employee who worked in more than one province
is to report the PA amount proportionately on each T4 slip. If the
employer is unable to do this, the total PA may be reported on one
of the T4 slips.
Where the organization has no RPP or DPSP, this box should be

left blank.
If the employee participated in the RPP or DPSP, and one of the

following applies, leave this box blank:
• the calculated PA amount is negative or zero

• the employee died during the year
• the employee is fully paid up; this happens when the
employee no longer accrues benefits in the plan, for
example, when the employee has accrued the maximum
number of years of service in the plan
54 Payroll account Enter the 15-digit account number under which the employee’s
number CPP contributions, EI premiums and income taxes were remitted.
The payroll account number does not appear on the two copies of
the T4 slip given to the employee.
Where source deductions are remitted under two separate payroll

account numbers, separate T4 slips must be completed for each
number.

Chapter 3

55 Employee’s PPIP Enter the PPIP (QPIP) premiums that were deducted from
premiums employees working in Québec.
Do not report the employer’s share on the T4 slip.
56 PPIP insurable This amount represents the total amount used to calculate the
earnings employee’s PPIP premiums for employees working in Québec.
Leave the box blank if:
• there are no insurable earnings

• the insurable earnings are the same as Box 14, or
• the insurable earnings are at, or over, the maximum for the
year
Other Information The “other information” area at the bottom of the T4 slip has boxes
where the employer can enter codes and amounts relating to
employment commissions, taxable allowances, taxable benefits,
deductible amounts, fisher’s income and other entries as required.
The boxes are not pre-numbered; it is up to the employer to enter

the applicable code.
Use the following codes to enter taxable allowances, taxable

benefits, deductible amounts, employment commissions, and other
entries.
Note:
Where more than six codes apply to the same employee in the “other information” area of the
T4 slip, a second T4 slip must be completed. Enter only the employer’s name and address,
employee’s name and Social Insurance Number and complete the required boxes in the
“other information” area. Report each code and amount only once.

Chapter 3
Exhibit 3-3
CODE DESCRIPTION DETAILED DESCRIPTION
Code Board and lodging If the employer provides an employee with free or
30 subsidized housing, meals, or board, enter Code 30 and the
corresponding amount (including any GST/HST/QST or
PST component). The employer is responsible for
assessing the fair market value of this taxable benefit.
This amount is also included in Box 14.

Code Special work site If the employer provides an employee with free or
31 subsidized housing, meals, or board and lodging at a
special work site and the employee completed a Form
TD4, Declaration of Exemption – Employment at a Special
Work Site, enter Code 31 and the amount.
Do not enter this amount in Box 14 or under Code 30 in

the “other information” area.
Code Travel in a prescribed If the employer provides an employee living in a
32 zone prescribed zone with an amount for travel assistance, it
must be identified. Enter Code 32 and the corresponding
amount (including any GST/HST/QST or PST
component).
Include any amount for medical travel assistance reported

using Code 33.

Code Medical travel If the employer provides an employee living in a
33 assistance prescribed zone with an amount for medical travel
assistance, report it using Code 33. The amount to be
reported is the medical portion of the travel assistance
reported under Code 32 (include any applicable
GST/HST/QST or PST).
Do not report this amount in Box 14.

Code Personal use of If an employer provides an employee with personal use of
34 employer’s automobile an automobile, enter Code 34 and the corresponding
or motor vehicle amount.

Chapter 3

Code Interest-free and low- If an employer provides an employee with an interest-free
36 interest loans or low-interest loan, including a qualified home loan,
because of an office or employment (including intended
employment), enter Code 36 and the corresponding
amount. There is no GST/HST/QST or PST applicable to
this benefit.

Code Security options benefits If an employee receives a taxable benefit under a
38 corporation’s agreement to issue its shares to the
employee, enter Code 38 and the corresponding amount.
There is no GST/HST/QST/PST on this benefit.
This amount is included in Box 14.

Code Security options If the employee is entitled to a deduction allowable under
39 deduction − 110(1)(d) paragraph 110(1)(d) (public corporation stock) of the
Income Tax Act, enter Code 39 and the eligible deduction.
This deduction amount is not included in Box 14.

Code Other taxable If the employer provides an employee with any other
40 allowances and benefits taxable allowances or benefits which are not included
elsewhere on the T4 slip, enter Code 40 and the
corresponding amount. Include any GST/HST/QST/PST
applicable to the benefits in the amount reported.

Code Security options If the employee is entitled to a deduction under paragraph
41 deduction − 110(1) (d.1) 110(1) (d.1) (Canadian controlled private stock) of the
Income Tax Act, enter Code 41 and one-half of the amount
entered under Code 38.
This deduction amount is not included in Box 14.

Code Employment If the employee sold property or negotiated contracts for
42 commissions the employer, enter Code 42 and the amount of the
employee’s commissions.

Chapter 3

Code Canadian Forces This code is used for a deduction from taxable income for
43 personnel, police, employment earnings and taxable allowances paid to:
employees of prescribed
international non- • Canadian Forces personnel and police who are
governmental deployed outside Canada on a high-risk or current
organizations and moderate-risk operational mission. The deduction
employees of prescribed is limited to earnings included in income, to a
international maximum rate of pay earned by a non-
organizations deduction commissioned member of the Canadian Forces.
• Employees of prescribed international non-
governmental organizations (who are not Canadian
citizens nor permanent residents of Canada) and
employees of prescribed international
organizations who are eligible to claim a deduction
from taxable income for employment income
received.

Code Eligible retiring Enter the amount of retiring allowances (also called
66 allowances severance pay) that were paid in the year and are eligible
for transfer to an RPP or RRSP, even if not transferred.
Do not include this amount in Box 14.

Code Non-eligible retiring Enter the amount of retiring allowances (also called
67 allowances severance pay) not eligible for transfer to an RPP or RRSP.

Code Indian (exempt income) Enter the amount of retiring allowances (also called
69 - Non-eligible retiring severance pay) that were paid to an Indian in the year and
allowances are not eligible for transfer to an RPP or RRSP.

Code Indian employee If you are an employer paying tax-exempt salary or wages
71 to an Indian, enter that income using Code 71. Consult the
Employers’ Guide – Payroll Deductions and Remittances
(T4001) and the Employers’ Guide – Filing the T4 Slip
and Summary (RC4120) for further information.
Code Past service If an employee contributed to a registered pension plan
74 contributions for 1989 (RPP) for 1989 or earlier past service contributions while a
or earlier years while a contributor, enter the contribution amount using Code 74.
contributor
To determine if the contributions are considered “while a
contributor”, see the CRA’s Interpretation Bulletin IT-167,
Registered Pension Plans- Employee Contributions.

Chapter 3

Code Past service If an employee contributed to a registered pension plan
75 contributions for 1989 (RPP) for 1989 or earlier past service contributions while
or earlier years while not not a contributor, enter the contribution amount using
a contributor Code 75.
To determine if the contributions are considered “while not

a contributor”, see the CRA’s Interpretation Bulletin IT-
167, Registered Pension Plans – Employee’s
Contributions.

Code Workers' compensation Enter the amount of workers' compensation benefits repaid
77 benefits repaid to the to the employer that was previously included in the
employer employee's salary. This allows employees to claim a
corresponding deduction as other employment expenses on
their T1 income tax filing.
This amount is not reported in Box 14.

Code Fishers – Gross income Using Code 78, enter the amount paid or payable to the
78 fisher from the proceeds of a catch. The earnings do not
include amounts paid for a catch or part of a catch made by
other persons who were not members of the crew.
This amount is not reported in Box 14.

Code Fishers – Net Code 79 is used to report the gross earnings amount (or
79 partnership amount gross value of the catch) reported in Code 78, minus the
25% prescribed amount and the total amount paid to the
share-persons reported in Code 80, multiplied by the
partnership agreement allocation.
This amount is not reported in Box 14; however, it is

included in Box 24 (Box 56 for fishers in Québec).
Code Fishers – Shareperson Code 80 is used to report the amount paid or payable to the
80 amount fisher from the proceeds of a catch based on the sharing
arrangement agreed to before embarking on the fishing
trip.
This amount is not reported in Box 14; however, it is

included in Boxes 24 (Box 56 for fishers in Québec) and
Code 78.

Chapter 3

Code Placement or An agency that places workers in employment under the
81 employment agency direction or control of a client and where the agency pays
workers - Gross income the worker reports gross income using Code 81. Do not
report this amount in Box 14.
If the employee is under the direct control of the agency,

the employee’s income should be reported in Box 14.
Code Taxi drivers and drivers Report gross income using Code 82.
82 of other passenger-
carrying vehicles - Do not report this amount in Box 14. Also, see Box 29.
Gross income
Code Barbers or hairdressers - Report gross income using Code 83.
83 Gross income
Do not report this amount in Box 14. Also, see Box 29.
Code Employee-paid Enter qualifying medical expense premiums (including any
85 premiums for private GST/HST or provincial tax that applies) paid by the
health services plans employee to private health services plans (e.g. within a
group insurance plan). The use of Code 85 is optional.

Code Security options election Enter the total amount of the security option cash-outs that
86 the employer has elected not to claim as an expense.

Code Emergency services Enter the exempt amount (up to $1,000) paid to an
87 volunteer exempt individual who performs firefighter or search and rescue
amount activities as a volunteer. This exemption only applies if the
individual performed services as a volunteer, not as an
employee.

Code Indian (Exempt Income) If you are an employer paying taxable income to a tax-
88 – Self Employment exempt, self-employed Indian, who works as a fisher,
barber or hairdresser, taxi driver or driver of other
passenger-carrying vehicles, enter the amount using Code
88. Consult the Employers’ Guide – Payroll Deductions
and Remittances (T4001) and the Employers’ Guide –
Filing the T4 Slip and Summary (RC4120) for further
information.

Chapter 3
T4/T4A Examples
Note:
The 2023 rates are provided for the T4/T4A information slip examples, and review questions
are based on these rates.
2023 Canada and Québec Pension Plan rates

Canada Quebec
Year’s maximum pensionable earnings $66,600.00 $66,600.00

Contribution rate 5.95% 6.40%
Annual maximum contribution $3,754.45 $4,038.40
2023 Employment Insurance and Québec Parental Insurance Plan

rates
EMPLOYMENT QUEBEC
EMPLOYMENT
INSURANCE PARENTAL
INSURANCE
(OUTSIDE INSURANCE
(QUEBEC)
QUEBEC) PLAN
Maximum insurable earnings $61,500.00 $61,500.00 $91,000.00
Premium rate 1.63% 1.27% 0.494%
Annual maximum premium $1,002.45 $ 781.05 $ 449.54

Chapter 3
Example:
Lorne Wordsworth is an employee in New Brunswick. The following are Lorne’s totals for
the taxation year:
T4
Totals
Box/Code
Regular earnings $30,000.00 14/24*/26*
Vacation pay $800.00 14/24*/26*
Employer-paid group term life insurance $150.00 14/26*/40
CPP contributions $1,633.28 16
EI premiums $ 502.04 18
Income tax $5,685.20 22
*24 – up to annual maximum insurable earnings; *26 – up to yearly maximum pensionable earnings
30,950.00 5,685.20
NB 1,633.28 30,800.00
30,950.00
502.04
WORDSWORTH LORNE
40 150.00

Chapter 3
Example:
Tamara Goldman is an employee in Ontario who participates in the organization’s defined
contribution registered pension plan (RPP). The following information about Tamara’s
earnings and deductions is for the taxation year:
T4
Totals
Box/Code
Vacation pay $ 2,000.00 14/24*/26*
Home loan interest non-cash taxable benefit $ 2,500.00 14/26*/36
Employer-provided automobile non-cash taxable $ 4,200.00 14/26*/34
benefit
Employer contribution to employee’s RRSP $ 1,228.00 14/24*/26*/
40
Employee RPP contributions (plan #1234560 – $ 2,500.00 20/52
Box 50)
Employer contributions to the RPP $ 2,500.00 52
EI premiums $1,002.45 18
Income tax $14,896.50 22
*24 – up to annual maximum insurable earnings; *26 – up to yearly maximum pensionable earnings.
2023
69,928.00 14,896.50
ON !Undefined !Undefined
!Undefined
1,002.45
GOLDMAN TAMARA
2,500.00
5,000.00
34 4,200.00 36 2,500.00 40 1,228.00

Chapter 3
Example:
Albert Little, an Ontario employee, joined Ambler and Sons on February 1, 1974.
Employment was terminated in December of the current year. Albert joined the company’s
defined contribution registered pension plan on February 1, 1975, and was 100% vested at
termination. On termination, Albert received a retiring allowance of $48,000.00. Albert had
the employer transfer $40,000.00 of the retiring allowance to an RRSP and received a
payment of $8,000 that was taxed at the 20% lump-sum tax rate.
The eligible amount of the retiring allowance is calculated as follows:
1. Calculate the number of applicable years for each of the two categories as per the
provisions.
• $2,000.00 for each calendar year, or part year, before 1996 in which the individual
was employed with the organization:
February 1974 to December 1995 = 22 years
• $1,500.00 for each year or part year of service, before 1989, that the employee:
○ did not belong to a registered pension plan, pension fund or deferred profit
sharing plan (DPSP)
○ did belong to a registered pension plan, pension fund or DPSP, but was not
fully vested for the pre-1989 years when the retiring allowance was paid
Calendar year 1974 = 1 year
2. Calculate the amount eligible for transfer to an RPP or RRSP.
$2,000.00 x 22 years $44,000.00

$1,500.00 x 1 year + 1,500.00
Eligible amount $45,500.00
3. Subtract the total of step 2 from the total amount of the retiring allowance to determine
the non-eligible amount.
Retiring Allowance $48,000.00

Eligible amount - 45,500.00
Non-eligible amount $ 2,500.00

Chapter 3
Example:
The following information about Albert’s earnings and deductions is for the taxation year:
T4
Totals
Box/Code
Vacation pay $ 3,962.00 14/24*/26*
Wages in lieu of notice $12,760.00 14/24*/26*
Eligible retiring allowance $45,500.00 66
Non-eligible retiring allowance $ 2,500.00 67
benefit
Employer contribution to employee’s RRSP $ 5,250.00 14/24*/26*/
40
Employee RPP contributions (plan #1234560 – $ 7,000.00 20/52
Box 50)
Employer contributions to the RPP $ 2,000.00 52
Income tax $37,640.00 22
20XX
107,872.00 37,640.00
ON !Undefined !Undefined
!Undefined
1,002.45
LITTLE ALBERT
7,000.00
9,000.00 1234560
34 2,900.00 40 5,250.00 66 45,500.00
67 2,500.00

Chapter 3
Content Review
• The T4 – Statement of Remuneration Paid is commonly referred to as the T4 slip.
This form must be completed for each person who received remuneration from
employment, where:
o statutory deductions for Canada/Québec Pension Plan (C/QPP) contributions,
Employment Insurance (EI), Québec Parental Insurance Plan (QPIP)
premiums and income tax were required
o the remuneration was $500 or more
o any amount of group term life insurance was provided
o any amount was provided to employees, former employees and non-resident
employees with security options benefits
• The form must be completed and issued by the last day of February of the following
year.
• Employees who worked in more than one province during the year must have a
separate T4 slip for earnings and deductions for each province in which they were
employed.
• Employees whose remittances were made under different Canada Revenue Agency
payroll account numbers must have a separate T4 slip for each number.
• It is very important that the Social Insurance Number (SIN) be correctly reported on
the T4 slip and that the name on the employee’s SIN document matches the name on
the T4 slip.
• The “other information” area at the bottom of the T4 slip has boxes where the
employer can enter codes and amounts relating to employment commissions, taxable
allowances, taxable benefits, retiring allowances, deductible amounts, fisher’s income
and other entries as required.
• Where more than six codes apply to the same employee in the “other information”
area of the T4 slip, a second T4 slip must be completed.

Chapter 3
Review Questions
9. Jerome Miller worked in Alberta, British Columbia, Ontario and Nova Scotia last year.
How many T4 slips will Jerome receive?
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.
CODE DESCRIPTION
Employment commissions
Fishers – Gross income
Personal use of employer’s automobile or motor vehicle
Other taxable allowances and benefits
Indian employee
Interest-free and low-interest loans
Security options benefits
Eligible retiring allowances

Chapter 3
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.
T4 BOX/
TOTALS
CODE
Regular earnings $75,000.00
Vacation pay $ 5,769.24
Home purchase loan interest non-cash taxable benefit $ 1,956.25
Employer-provided automobile non-cash taxable benefit $ 5,303.33
Employer contribution to employee’s RRSP $ 2,600.00
CPP contributions $3,754.45
EI premiums $1,002.45
Income tax $25,342.17
Group term life insurance non-cash taxable benefit $ 1,200.00

Chapter 3
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.
T4 BOX/
TOTALS
CODE
Performance bonus $15,000.00
Home purchase loan interest 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
Employee contributions to an RPP (plan #9876589) $ 5,800.00
Employer contributions to an RPP $ 2,900.00
Charitable donations $ 2,400.00

Chapter 3
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 employment was terminated in November. When employment was terminated,
John was fully vested in the company’s defined contribution registered pension plan,
which was joined in July 1984. Upon termination, John received a retiring allowance of
$86,000.00. John had the employer transfer the entire eligible amount to an 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.
T4 BOX/
TOTALS
CODE
Performance bonus $ 35,000.00
Commissions $ 56,923.00
Employer-provided automobile non-cash taxable $ 5,237.00
benefit
Employee contributions to an RPP (plan #3589562) $ 3,810.00
Employer contributions to an RPP $ 3,810.00
Charitable donations $ 1,600.00

Chapter 3

Chapter 3
Completing the T4 Summary

The T4 Summary – Summary of Remuneration Paid is the form submitted by the employer,
when filing paper copies of the T4 slips, summarizing the totals reported on the slips. Blank
T4 summary forms are available on the CRA’s website, or they can be ordered from the
CRA.
The completed T4 Summary is sent to the appropriate Taxation Centre along with Copy 1 of
the paper T4 slips. The employer makes a photocopy of the form for their file.
If the CRA copies of the T4 slips are filed electronically, a paper copy of the T4 summary
form is not submitted. However, the employer should maintain a completed summary in their
records.
General Guidelines
Similar to completing the T4 slip, there are general guidelines that should be followed when
completing the T4 Summary:
• report all amounts in Canadian dollars and cents

• complete a separate T4 Summary for each payroll account number and attach it to the
front of the corresponding T4 slips
• ensure the amounts reported on the T4 Summary agree with the total of the amounts
reported on the T4 slips
• enter the taxation year for which the summary is related
• enter the payroll account number, name and address of the employer
A blank copy of the T4 Summary form follows.

Chapter 3
Year End Federal

Chapter 3
How to Complete the T4 Summary

The following table lists each line of the T4 Summary and the information required.
Exhibit 3-4
# LINE INFORMATION REQUIRED
14 Employment income Enter the total of the amounts reported in Box 14 of the
T4 slips.
16 Employees’ Canada Pension Enter the total of the amounts reported in Box 16 of the
Plan contributions T4 slips. Do not include Québec Pension Plan
contributions in the total.
18 Employees’ Employment Enter the total of the amounts reported in Box 18 of the
Insurance premiums T4 slips.
19 Employer’s Employment Enter the employer’s share of EI premiums. The total
Insurance premiums should equal the total employee premiums reported on
line 18 multiplied by the employer’s premium rate.
20 Registered pension plan Enter the total of the amounts reported in Box 20 of the
contributions T4 slips.
22 Income tax deducted Enter the total of the amounts reported in Box 22 of the
T4 slips.
27 Employer’s Canada Pension Enter the employer’s share of CPP contributions. The
Plan contributions employer’s share should equal the employee’s
contributions.
52 Pension adjustment Enter the total of the amounts reported in Box 52 of the
T4 slips.
74, 75 Canadian-controlled private Enter the Social Insurance Number(s) of any
corporations or proprietor(s) or principal owners.
unincorporated employers
76 Person to contact about this Enter the name of the person to contact about this
return return.
78 Telephone number Enter the telephone number of the person to contact
about this summary.
80 Total deductions reported Enter the total of the amounts reported on lines 16, 18,
19, 22 and 27 of the T4 Summary.
82 Minus: remittances Enter the total amount remitted to the CRA for the tax
year under the payroll account number.
-- Difference Subtract line 82 from line 80.

Chapter 3
Year End Federal

84 & Overpayment Subtract line 82 from line 80 - total deductions
86 Balance due reported.
If the result is negative and you do not file any other

types of summaries for this account, enter the result on
line 84. Attach a note indicating the reason for the
overpayment and whether you want the Canada
Revenue Agency to transfer the amount to another
account or refund the overpayment. If the result is
$0.00, leave lines 84 and 86 blank. There is no refund
or credit for amounts less than $2.00.
-- Amount enclosed Amount enclosed
There are several ways to remit any amounts owing,
whether filing electronically or on paper.
Filing electronically
Any balance owing is remitted separately from the
filing. Payment options are using the CRA's My
Payment or paying through a financial institution's
telephone banking, Internet banking, or automated bank
machines. The payment can also be sent to any tax
centre with a letter that indicates the tax year for which
the payment applies, the amount covering the
outstanding balance, and the payroll account number. If
the payment is not made electronically, it should be in
the form of a cheque or money order payable to the
Receiver General.
Filing on paper
If there is a balance due, enclose a cheque or money
order payable to the Receiver General with the return.
If the payment is remitted late, any balance owing may
be subject to penalties and interest at the prescribed
rate.
Note:
Regardless of the filing method, Threshold 2 remitters
must remit any balance due electronically or in person
at their Canadian financial institution. Threshold 2
remittances that are received at a CRA tax office at
least one full day before the amount is due will be
considered to have been received by a financial
institution.

Chapter 3

-- Certification Enter the first name and surname (in capital, block
letters) of the person authorized by the organization to
certify that the information on the T4 Summary is
correct. The authorized person must date and sign the
form and also list their position or title.
88 Total number of T4 slips Enter the total number of T4 slips included with the T4
filed summary.

Chapter 3
Year End Federal
Content Review
• The T4 Summary – Summary of Remuneration Paid is the form submitted by the
employer when filing paper copies of the T4 slips, summarizing the totals reported on the
slips.
• If the Canada Revenue Agency (CRA) copies of the T4 slips are filed electronically, a
paper copy of the T4 Summary form is not submitted.
• A separate T4 Summary must be completed for each payroll account number and
attached to the front of the corresponding T4 slips.

Chapter 3
Review Questions
15. True or False. A paper copy of the T4 Summary form is required, regardless of the method
used to file the T4 slips.
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: $394,720.44

Chapter 3
Year End Federal
Completing the T4A Slip

The T4A – Statement of Pension, Retirement, Annuity and Other Income is similar to the T4
slip, using codes to report the different types of income amounts. The T4A slip, however, is used
to report income not reported on the T4 slip, such as:
• pension or superannuation
• lump-sum payments
• self-employed commission
• patronage allocations
• Registered Education Savings Plan (RESP) payments
• other income such as research grants, death benefits, wage-loss replacement plan
payments if you were not required to withhold Canada Pension Plan contributions and
Employment Insurance premiums, and certain benefits paid to partnerships or
shareholders
• fees or other amounts for services
A T4A slip must be issued if any of the following criteria apply:
• the payments total more than $500.00

• income tax was deducted at source from the payments reported on a T4A slip
• group term life insurance premiums paid on behalf of retirees are greater than $50.00
• the T4A slip issuer is the administrator or trustee of a multi-employer benefit plan and
provided taxable benefits to employees, former employees or retirees if the total of all
benefits paid is greater than $25.00
General Guidelines
There are general guidelines to follow when completing the T4A slips:
• a separate T4A slip is prepared for each CRA payer’s account number
• the T4A slips must be completed in alphabetical order by surname
• all amounts are reported in Canadian dollars and cents
• no negative dollar amounts can be reported on the slips
• the headings of the boxes cannot be changed

Chapter 3

Chapter 3
Year End Federal
Completion of the T4A slip

The following table lists the boxes, the codes, and the information to be completed on the T4A
slip by the employer or payer.
Exhibit 3-5
-- Recipient’s name Enter the last name of the recipient, followed by the first name and
and address initials. Directly below the name, enter the current address,
including province, territory and postal code, or U.S. state and zip
code and country.
-- Employer’s or Enter the employer’s or payer’s name as it appears on the
payer’s name organization’s monthly remittance statement from the CRA.
-- Year Enter the four digits of the calendar year in which the payment was
made to the recipient.
012 Social Insurance Enter the SIN of the person to whom the payment was made. As
Number (SIN) with the T4 slip, it is very important that this number is correctly
reported on the T4A slip and that the name and number on the
person’s SIN document match the name and number on the T4A
slip.
013 Recipient’s If the recipient of the amount is a business (sole proprietor,
account number partnership or corporation), enter the recipient’s 15-character
account number.
016 Pension or This box is normally completed by the pension plan administrator.
superannuation It is used to report the taxable portion of any pension or annuity
payment paid to an employee, retired employee, or survivor or
spouse of an employee out of a superannuation or pension fund or
plan, including disability benefits paid in the form of a life annuity.
018 Lump-sum This box is normally completed by the pension plan administrator.
payments Box 018 is used to report the taxable part of a single payment out of
a pension fund or plan, including any single payment resulting from
a:
• withdrawal from the plan, retirement from employment, or
death of an employee or former employee
• termination of, amendment to, or modification of the plan
• reimbursement of any over-contributions to the plan
It is also used to report the taxable part of any single payment out of
a deferred profit sharing plan (DPSP), including a single payment
due to a:
• withdrawal from the plan, retirement from employment, or
death of an employee or former employee
• reimbursement of any over-contributions to the plan

Chapter 3

018 Lump-sum Lump-sum payment income is usually exempt from income tax
payments – when a person receives it as a result of employment income that
Indian (exempt was exempt from income tax. If a part of the employment income
income) was exempt, then a similar part of these amounts is also exempt.
Do not include exempt income in Box 018; instead, include it in the

“Other information” area using Code 148.
020 Self-employed Enter the amount of commissions paid to an independent agent.
commissions Do not report any GST/HST paid on those services.
022 Income tax Enter the total income tax deducted (excluding Québec provincial
deducted income tax) from payments reported on the T4A slip. Leave the box
blank if no income tax was deducted.
Do not include amounts withheld under the authority of a

garnishment or a Requirement to Pay.
024 Annuities Enter payments from an annuity that an individual bought with a
refund of premiums from a deceased annuitant’s RRSP.
Enter annuity payments from a life annuity purchased from the

proceeds of a life income fund (LIF) or the proceeds of a registered
retirement income fund (RRIF).
048 Fees for services Enter any fees or other amounts paid for services. Do not include
the GST/HST paid to the recipient for these services.
061 Payer’s Account Enter the 15-character account number used to remit the recipients’
Number federal statutory deductions. The account number should not appear
on the recipient’s copies of the T4A slip.
Other The “other information” area at the bottom of the T4A slip has
Information boxes where the payer can enter codes and amounts that relate to
other types of payments if they apply.
The boxes are not pre-numbered; it is up to the payer to enter the

applicable code.
Note:
Where more than twelve codes apply to the same recipient, a second T4A slip must be
completed. Enter only the payer’s name and address, the recipient’s name and Social Insurance
Number and complete the required boxes in the “other information” area. Report each code and
amount only once.

Chapter 3
Year End Federal

014 Recipient’s This code is optional. Enter a retiree number, an employee
number number or a payroll number.
028 Other income Enter any other amount which is not reported elsewhere on a T4A
slip or other information slip if the amount is more than $500 or if
income tax was deducted. All other identified amounts are
assigned a separate area for reporting.
030 Patronage Report all allocations given to customers for their patronage,
allocations whether paid in cash or in kind, by certificate of indebtedness,
issue of shares, set-off, assignment or any other way. The
allocations should be in proportion to the patronage.
032 Registered This code is usually used by a plan administrator when there is no
pension plan longer an employee-employer relationship. The value of
contributions contributions a former employee made to buy past service is
(past service) entered here.
Also, report the same amount using:

• Code 126 ‒ Pre-1990, RPP past service contribution,
while a contributor, or
• Code 162 ‒ Pre-1990, RPP past service contributions,
while not a contributor
034 Pension The pension plan administrator for a multi-employer plan (MEP)
adjustment would report the pension adjustment (PA) in dollars only using
this code. Enter the amount of the PA that the employee has under
an RPP during a period of leave or reduced services.
• For periods of leave or reduced services not under a MEP,

report the PA on a T4 slip.
036 Pension plan Enter the CRA issued 7-digit pension plan registration number
registration under which the employee accrued benefits and which gave rise
number to the PA reporting. If contributions to more than one plan were
made, enter the registration number of the plan under which the
employee has the largest pension adjustment.
Additional registration numbers (not more than three) for any

additional plans on lines 071, 072 and 073 of the T4A Summary.
040 RESP Promoters of a registered education savings plan (RESP) who pay
accumulated RESP accumulated income payments (other than a refund of
income contributions, an educational assistance payment, an amount
payment* transferred to another RESP, or a payment made to a designated
educational institution in Canada) to a subscriber of the plan
report this amount using Code 040.

Chapter 3

042 RESP Promoters of a registered education savings plan (RESP) who pay
educational RESP education assistance payments to help further an
assistance individual’s education at a post-secondary school (other than a
payments* refund of contributions) report this amount using Code 042.
046 Charitable Enter the amount deducted for donations to registered charities in
donations Canada, where the charitable organization will not be issuing
separate receipts.
102 Lump-sum Enter superannuation or pension benefits amounts paid in a lump-
payments - non- sum to a Canadian resident under an unregistered pension plan for
resident services services that the person rendered in a period throughout which the
transferred under person did not reside in Canada. This amount is included in Box
paragraph 60(j) 018.
104 Research grants Enter the amount of research grants paid to the recipient.
105 Scholarships, Enter the amount of the scholarships, bursaries, fellowships,
bursaries, artists’ project grants and prizes paid to the recipient.
fellowships,
artists’ project
grants and prizes
106 Death benefits Enter the gross amount of any payment (including a payment to a
surviving spouse, common-law partner, heir or estate) on or after
the death of an employee to recognize the employee’s service in
an office or employment.
*The reporting of RESPs will not be on the final examination as it is not a payroll item.

Chapter 3
Year End Federal

107 Payments from a Enter certain payments made under a wage-loss
wage-loss replacement plan, except for some payments made under an
replacement plan insured wage-loss replacement plan, even if the employer
contributed to the plan. To determine the types of payments
to be reported, see IT-428, Wage Loss Replacement Plans.
108 Lump-sum If you paid a single amount out of an RPP to an individual
payments from a or you transferred such an amount that is considered to be
registered pension income, you must report this amount using Code 108. This
plan (RPP) that you amount is included in Box 018.
cannot transfer
109 Periodic payments Enter pension benefits paid from a pension fund or plan that
from an is not registered.
unregistered
pension plan
110 Lump-sum Enter lump-sum amounts paid out of an RPP or DPSP
payments accrued accrued to December 31, 1971. This amount is included in
to Dec 31, 1971 Box 018.
111 Income averaging Enters annuity payments under an income-averaging
annuity contracts annuity contract. This amount is included in Box 024.
(IAAC)
115 Deferred profit Enter instalment or annuity payments made under a deferred
sharing plan annuity profit sharing plan. This amount is included in Box 024.
or instalment
payment
116 Medical travel If an employee usually lives in a prescribed zone and works
assistance at a special work site in a prescribed zone, report any non-
business travel assistance (including medical travel
assistance) using Code 028. Separate the medical travel
from the other non-business travel and enter the medical
travel amount using Code 116.
117 Loan benefits Enter the benefits of a loan that a person or partnership
received as a shareholder or related to a shareholder.
118 Medical premium Enter the employer premiums paid as a contribution to a
benefits provincial or territorial health services insurance plan for a
retired or former employee.
119 Premiums paid to a Enter any benefit for employer-provided group term life
group term life insurance when the benefit is conferred by a former
insurance plan employer or reported by another party on behalf of the
employer or former employer.
122 RESP accumulated Enter RESP accumulated income payments paid to someone
income payments other than the subscriber, spouse or common-law partner.
paid to other This amount is included in Box 040.
123 Payments from a Enter any payments made from a revoked DPSP.
revoked DPSP

Chapter 3

124 Board and lodging If an employee does not usually live in a prescribed zone
at special work sites but works at a special work site in a prescribed zone and
meets residency requirements for the northern residents
deductions, use Code 124 to enter the exempt portion of the
board and lodging benefits received while working at the
special work site which is within 30 kilometres from the
nearest urban area having a population of at least 40,000
persons.
125 Disability benefits Enter any disability benefits paid out of a superannuation or
paid out of a pension plan. These payments are not subject to CPP/QPP
superannuation or contributions, EI, or PPIP premiums, nor income tax.
pension plan
126 Pre-1990 Enter contributions a former employee made to buy past
Registered Pension service for years before 1990.
Plan past service
contributions while A corresponding entry is also required using Code 032.
a contributor
127 Veterans’ benefits Enter amounts received in the year on account of an
earnings loss benefit, supplementary retirement benefit or
permanent impairment allowance payable to the taxpayer
under Part 2 of the Canadian Forces Members and Veterans
Re-establishment and Compensation Act.
128 Veterans’ benefits Enter the sums of :
eligible for pension • amounts paid in the year for a retirement income
splitting security benefit payable to the individual under Part
2 of the Veterans Well-being Act
• amounts paid in the year for an income replacement
benefit payable under Part 2 of the Veterans Well-
being Act if the amount is determined under
subsection 19.1(1), paragraph 23(1)(b) or subsection
26.1(1) of that Act (as modified, where applicable,
under Part 5 of that Act)
This amount is also reported in Box 016.
129 Tax deferred Enter all tax deferred cooperative shares issued by an
cooperative share agricultural cooperative in the year.
130 Apprenticeship Enter apprenticeship incentive grants paid to registered
incentive grant or apprentices who have completed their first or second
Apprenticeship year/level (or equivalent) of an apprenticeship program in a
completion grant Red Seal trade.
Enter apprenticeship completion grants paid to registered
apprentices who have completed their apprenticeship
training in a Red Seal trade.

Chapter 3
Year End Federal

131 Registered Enter payments paid to an RDSP plan beneficiary.
disability savings
plan (RDSP)
132 Wage earner Enter payments paid to workers due to employer bankruptcy
protection program or insolvency.
(WEPP)
133 Variable pension Enter variable pension benefits paid out of a money
benefits purchase RPP.
134 Tax-free savings Enter the taxable portion of amounts paid during the exempt
account (TFSA) period to a beneficiary who is a resident of Canada; also,
taxable amount amounts that are required to be included in the income of a
former TFSA trust in its first taxable year.
135 Recipient-paid A recipient can claim, as a qualifying medical expense,
premiums for premiums they paid to a private health services plan. The
private health use of Code 135 is optional; however, if it is not used, the
services plan CRA may ask the recipient to provide supporting
documents.
136 Federal income Enter amounts paid out to the beneficiary from the Federal
support for parents Income Support for Parents of Murdered or Missing
of murdered or Children grant.
missing children
grant (PMMC)
142 Indian (exempt Enter the amount of retiring allowances (also called
income) - Eligible severance pay) that were paid to an Indian in 2009 or prior
retiring allowances years and are eligible for transfer to an RPP or RRSP, even
(for 2009 and prior if not transferred. Retiring allowances paid in 2010 or later
years only) are reported on a T4 slip.
143 Indian (exempt Enter the amount of retiring allowances (also called
income) – Non- severance pay) that were paid to an Indian in 2009 or prior
eligible retiring years and are not eligible for transfer to an RPP or RRSP.
allowances (for Retiring allowances paid in 2010 or later are reported on a
2009 and prior T4 slip.
years only)
144 Indian (exempt Enter all amounts that are exempt income for Indians and
income) – other are not reported elsewhere on the T4A slip.
income
146 Indian (exempt Pension or superannuation income is usually exempt from
income) – pension income tax when a person receives them as a result of
or superannuation employment income that was exempt from income tax. If a
part of the employment income was exempt, then a similar
part of these amounts is also exempt.

Chapter 3

148 Indian (exempt Lump-sum payment income is usually exempt from income
income) – lump- tax when a person receives them as a result of employment
sum payments income that was exempt from income tax. If a part of the
employment income was exempt, then a similar part of
these amounts is also exempt.
150 Labour Adjustment Enter payments under the Labour Adjustment Benefits Act
Benefits Act and or a benefit payable under the Appropriation Act to
Appropriation Act compensate for the loss of office or employment, such as in
the textile and leather-tanning industries.
152 SUBP qualified Enter payments received under a supplementary
under the Income unemployment benefit plan (SUBP) that does qualify as a
Tax Act SUBP under the Income Tax Act (not including maternity/
parental top-ups, which are included on a T4 slip).
154 Cash award or prize Enter a cash award or prize paid directly from a
from payer manufacturer to the employee of a dealer or other sales
organization.
156 Bankruptcy Enter amounts paid by a trustee in bankruptcy to employees
settlement of a bankrupt corporation in settlement of claims filed for
wages that the bankrupt employer did not pay.
162 Pre-1990 Enter contributions a former employee made to buy past
Registered Pension service for years before 1990.
Plan past service
contributions while A corresponding entry is also required using Code 032.
not a contributor
180 Lump-sum If you paid a single amount out of a DPSP to an individual
payments from a or you transferred such an amount that is considered to be
deferred profit income, you must report this amount using Code 180. This
sharing plan amount is included in Box 018.
(DPSP) that you
cannot transfer
190 Lump-sum Enter any pension benefits paid from a pension fund or plan
payments from an that is not registered. This amount is included in Box 018.
unregistered plan
194 Pooled Registered Enter the amount of the annuity payments from taxable
Pension Plans income or withdrawals from a PRPP at any age.
(PRPP) annuity
payments from
taxable income
195 Indian (exempt Enter the amount of PRPP payments that are exempt
income) – PRPP income for Indians.
payments

Chapter 3
Year End Federal

196 Adult basic Enter the amount of funding or other financial assistance
education tuition you paid on behalf of the individual for tuition fees for the
assistance individual’s adult basic education training provided under a
program established under the authority of the Department
of Employment and Social Development Act (such as the
Canada Job Grant program). This amount, which is eligible
for the adult basic education tuition assistance deduction, is
also included in Code 105.
200 Provincial or For 2021 and later tax years, certain amounts that a
Territorial COVID- provincial or territorial government paid as financial
19 financial assistance to support individuals affected by COVID-19
assistance payments must be reported on a T4A slip.
201 Repayment of For 2021, the CRA has introduced a repayment code 201 on
COVID-19 the T4A slip to report federal, provincial and territorial
financial assistance COVID-19 financial assistance payments that were repaid
in 2021 in respect of an overpayment of federal, provincial
or territorial COVID-19 financial assistance payments
received in 2020.
205 One-time payment For 2021 and later tax years, the CRA introduced income
for older seniors Code 205 to report the $500 supplementary OAS payment
made to individuals who will be 75 years of age or older on
June 2020, and this amount must be reported on the T4A
slip.
210 Postdoctoral For 2021 and later tax years, the CRA introduced Code 210
Fellowship Income to report Postdoctoral Fellowship Income, in addition to its
regular reporting at box 105 due to proposed legislation
provided in Budget 2021.

Chapter 3
Example:
An organization in British Columbia hired Kim Nguyen to provide consulting services while
the organization went through a merger.
The services provided are not part of the organization's regular business activities and have
been agreed to between the two parties in a service agreement. Kim is considered an
independent contractor and has invoiced the organization $10,000 in fees for service.

Chapter 3
Year End Federal
Content Review
• The T4A slip is used to report income not reported on the T4 slip, such as:
o pension or superannuation
o lump-sum payments
o self-employed commission
o patronage allocations
o Registered Education Savings Plan (RESP) payments
o other income such as research grants, death benefits, wage-loss replacement
plan payments if you were not required to withhold Canada Pension Plan
contributions and Employment Insurance premiums, and certain benefits paid
to partnerships or shareholders
o fees or other amounts for services
• A T4A slip must be issued if any of the following criteria apply:
o the payments total more than $500.00
o income tax was deducted at source from the payments reported on a T4A slip
o the organization provided any amount of group term life insurance taxable
benefits to former employees or retirees, even if the total is $500.00 or less
o group term life insurance premiums paid on behalf of retirees are greater than
$50.00
o the T4A slip issuer is the plan administrator or trustee of a multi-employer
benefit plan and provided taxable benefits to employees, former employees or
retirees if the total of all benefits paid is greater than $25.00
• A separate T4A slip is prepared for each CRA payroll account number.

Chapter 3
Review Questions
17. Complete the following chart with the correct box or code number for a T4A slip.
BOX # INFORMATION REQUIRED

Lump-sum payments
Fees for services
Recipient’s account number
Other income
Death benefits
Income tax deducted
18. Give a description for each of the following T4A slip ‘other information’ codes.
CODE DESCRIPTION
119
125
104
116
105

Chapter 3
Year End Federal
19. Connolly Corporation, an Ontario organization, paid a $24,000.00 death benefit to

Suzanne Knowles, the widow of their employee, Jerome Knowles, who passed away in
September. Calculate the income tax withholding on the death benefit and complete the
T4A slip for Suzanne.
Death benefits are taxed using the lump-sum income tax rates; however, the first
$10,000.00 of a death benefit is exempt from income tax.

Chapter 3
Completing the T4A Summary

The T4A Summary – Summary of Pension, Retirement, Annuity, and Other Income, a copy
of which follows, is used to summarize and reconcile the totals from the T4A slips being
submitted. Both the slips and the summary form must be received by the Canada Revenue
Agency by the last day of February for payments paid during the previous taxation year.
If paper T4A slips are used, a paper T4A Summary must be sent to the appropriate Taxation
Centre, along with copy 1 of the paper T4A slips. The employer should keep a copy of the
summary for their records. If the T4A slips are filed electronically, a paper copy of the
summary form is not required.
General Guidelines
There are general guidelines for completing the T4A Summary form:
• all amounts are reported in Canadian dollars and cents

• a separate T4A Summary must be submitted for each CRA payroll account number
• the totals reported on the T4A Summary must agree with the totals of the amounts
reported on the T4A slips

Chapter 3
Year End Federal

Chapter 3
The following table lists the required information for each line of the T4A Summary.
Exhibit 3-6
016 Pension or superannuation the total of the amounts reported in Box 016 of the T4A
slips
018 Lump-sum payments the total of the amounts reported in Box 018 of the T4A
slips
020 Self-employed the total of the amounts reported in Box 020 of the T4A
commissions slips
022 Total income tax the total of the amounts reported in Box 022 of the T4A
deductions reported slips
024 Annuities the total of the amounts reported in Box 024 of the T4A
slips
028 Other income the total of the amounts reported in Box 028 of the T4A
slips
030 Patronage allocations the total of the amounts reported in Box 030 of the T4A
slips
032 Pension plan the total of the amounts reported in Box 032 of the T4A
contributions (past slips
service)
034 Pension adjustment the total of the amounts reported in Box 034 of the T4A
slips
040 RESP accumulated the total of the amounts reported in Box 040 of the T4A
income payments slips
042 RESP educational the total of the amounts reported in Box 042 of the T4A
assistance payments slips
048 Fees for services the total of the amounts reported in Box 048 of the T4A
slips
101 Other information the total of any amounts not already reported elsewhere
on the T4A Summary
071, Canada Revenue Agency- the 7-digit pension plan registration numbers assigned
072, issued registration by the Canada Revenue Agency (maximum three)
073 number(s) for RPP
074, Canadian-controlled the Social Insurance Number(s) of the proprietor(s) or
075 private corporations or principal owner(s)
unincorporated employers

Chapter 3
Year End Federal

076 Person to contact about the name of the person to contact about this return
this return
078 Telephone number the telephone number of the person to contact about this
return
082 Remittances the total amount remitted to the CRA for the year under
this CRA payroll account number
-- Difference the difference between the amount in line 082 and the
amount in line 022 - if there is no difference, leave lines
084 and 086 blank; the CRA does not refund or charge a
difference of less than $2.00
084 Overpayment If the amount on line 082 is greater than the amount on
line 022, and no other type of summary is due to be filed
for this business number, the difference is entered here.
A letter should be sent to the CRA explaining how the
overpayment occurred and how the monies are to be
refunded
086 Balance due If the amount on line 022 is more than the amount on
line 082, the balance due is entered here
-- Amount enclosed Amount enclosed
There are several ways to remit any amounts owing,
whether filing electronically or on paper.
Filing electronically
Any balance owing is remitted separately from the
filing. Payment options include using the CRA's My
Payment or paying through a financial institution's
telephone banking, Internet banking, or automated bank
machines. The payment can also be sent to any tax
centre with a letter that indicates the tax year for which
the payment applies, the amount covering the
outstanding balance, and the payer’s account number. If
the payment is not made electronically, it should be in
the form of a cheque or money order payable to the
Receiver General.
Filing on paper
If there is a balance due, enclose a cheque or money
order payable to the Receiver General with the return. If
the payment is remitted late, any balance owing may be
subject to penalties and interest at the prescribed rate.

Chapter 3

Note: Regardless of the filing method, Threshold 2
remitters must remit any balance due electronically or in
person at their Canadian financial institution. Threshold
2 remittances that are received at a CRA tax office at
least one full day before the due date will be considered
to be received by a financial institution, and a penalty
will not be charged.
088 Total number of T4A slips The total number of all T4A slips included with the T4A
filed Summary
-- Certification The date, signature and position of the person authorized
by the organization to certify the information on the T4A
slips and the T4A Summary are entered here.

Chapter 3
Year End Federal
Content Review
• The T4A Summary – Summary of Pension, Retirement, Annuity, and Other Income is
used to summarize and reconcile the totals from the T4A slips being submitted.
• Both the slips and the summary form must be received by the Canada Revenue
Agency (CRA) by the last day of February for payments paid during the previous
taxation year.
• If the CRA copies of the T4A slips are filed electronically, a paper copy of the
summary form is not required to be submitted.
• A separate T4A Summary must be submitted for each CRA payroll account number.

Chapter 3
Review Questions
20. When does an employer need to submit a paper copy of the T4A Summary form?

Chapter 3
Year End Federal
Pensionable and Insurable Earnings

Review
The Pensionable and Insurable Earnings Review (PIER) is a Canada Revenue Agency (CRA)
document that is produced as a result of an audit check performed by the CRA after receipt
of an employer’s T4 Summary. The purpose of the audit check is to identify any deficiencies
in Canada Pension Plan contributions and Employment Insurance premiums.
The CRA checks for deficiencies by comparing the pensionable and insurable amounts
reported on the T4 slips with the required Canada Pension Plan (CPP) contributions or
Employment Insurance (EI) premiums based on their calculations. If there is a difference
between the CRA calculations and the amounts reported on the T4 slip, the employer will
receive a PIER report. The PIER report will show the employee’s name and the amount of
the CPP contribution or EI premium deficiency.
The employer must respond to each deficiency reported on the PIER by the deadline stated
on the report. If the employee was truly deficient, the employer must remit the amounts
owing for both the employee and the employer’s portion. There are circumstances, which are
explained below when there was no deficiency. In these cases, the employer must provide an
explanation when returning the form to the CRA.
Canada Pension Plan Deficiencies

The CRA identifies CPP contribution deficiencies by performing the following test on every
T4 slip submitted.
The employee’s CPP contributions reported in Box 16 must be at least equal to the
pensionable earnings reported in Box 26, less the annual exemption multiplied by the current
contribution rate to the annual maximum contribution
The formula is as follows:
Applicable
CPP pensionable CPP basic CPP CPP contribution
( earnings shown on - exemption for ) x contribution = to annual
the T4 slip the year rate for the maximum
year
If an “X” is reported in Box 28 indicating that the employee was exempt from CPP
contributions for the entire tax year, and amounts were reported in either the pensionable
earnings Box 26 or the CPP contributions Box 16, the “X” will be ignored, and the
deficiency test will be performed.

Chapter 3
Several situations might cause a CPP contribution deficiency:
• Not all the earnings reported in Box 14 are pensionable, and the same amount is
reported in Box 26. If an employee turns 18 or 70 years of age, started to receive a
CPP retirement pension and filed a CPT30 - Election to Stop Contributing to the
Canada Pension Plan, or Revocation of a Prior Election form or was considered
disabled by the CPP, then Box 26 should only record the portion of the total earnings
in Box 14 that are subject to CPP contributions.
• Taxable benefits and allowances were added to the employee’s record after the last
pay of the year was processed. For example, a car allowance was paid through
accounts payable and added to the employee’s record after the last pay for the year
had been processed. If the employee had not reached the maximum for CPP
contributions, the contributions would be deficient. It should be noted that these
practices are not in compliance with government requirements.
• Manual cheques were issued with no CPP contributions withheld.
• The employee was set up in the system incorrectly. Some systems’ logic uses the
employee’s birth date to determine if CPP contributions are required. If the birth date
is entered incorrectly or if the exempt box is completed in error, CPP contributions
will not be deducted.
Employment Insurance Deficiencies

The CRA identifies EI premium deficiencies by performing the following test on every T4
slip submitted.
The employee’s EI premiums reported in Box 18 are at least equal to the insurable earnings
reported in Box 24 multiplied by the current year’s premium rate to the annual maximum
premium.
The formula is as follows:
EI insurable earnings Applicable EI premium EI premiums to annual

x =
shown on the T4 rate for the year maximum
If an “X” is reported in Box 28 indicating that the employee was exempt from EI for the
entire tax year, and amounts were reported in either the insurable earnings Box 24 or EI
premiums Box 18, the “X” will be ignored, and the deficiency test will be performed.

Chapter 3
Year End Federal
Several situations might cause an EI premium deficiency:
• Not all the earnings reported in Box 14 are insurable, and the same amount is reported
in Box 24. For example, non-cash taxable benefits, as well as top-up payments for
maternity, parental, compassionate care or sick benefits, are not insurable earnings.
Only the portion of the earnings reported in Box 14 that are insurable should be
reported in Box 24.
• If an individual holds more than 40% of the voting shares of the organization, then
their earnings are not insurable. In this case, an “X” should be entered in Box 28, EI
exempt.
• Cash allowances and cash taxable benefits (for example, employer contributions to a
group RRSP) were added to the employee’s record after the last pay for the year had
been processed. If the employee had not reached the maximum for EI premiums, the
premiums would be deficient. It should be noted that these practices are not in
compliance with government requirements.
• Manual cheques were issued with no EI premiums withheld.
• The employee was set up in the system incorrectly. EI premiums are deducted from
all insurable employment; there are no age limitations. Elected officials’ earnings and
directors’ fees (unless paid to a director of a crown corporation listed in Schedule III
of the Financial Administration Act) are not insurable, and therefore no EI premiums
should be deducted. Employees who are exempt from Employment Insurance should
be set up in the system so that an “X” will be reported in Box 28, EI exempt.
Common Reporting Errors

It is in payroll professionals’ best interest to subject their payroll to a PIER audit to check for
and correct any errors before printing the T4 slips.
The most common reporting errors occur when amounts are not correctly reported in:
• Box 24, EI insurable earnings

• Box 26, C/QPP pensionable earnings
• Box 28, Exempt (C/QPP or EI)
The following points should be reviewed to minimize the possibility of errors:
• only use an “X” in the appropriate section of Box 28 if the employee was exempt
from C/QPP contributions or EI premiums for the entire tax year. If the exempt status
is indicated for C/QPP contributions or EI premiums, a zero should appear in CPP
pensionable earnings (Box 26) or EI insurable earnings (Box 24) with no amount in
CPP contributions (Box 16) or EI premiums (Box 18)

Chapter 3
• if the employee reached age 18 during the year, ensure that the C/QPP contributions
and the pensionable earnings were calculated starting on the first pay of the month
following their 18th birthday
• if the employee reached age 70 during the year, ensure the CPP contributions stop the
first pay of the month following their 70th birthday
• if the employee was considered disabled by the Canada Pension Plan or the Régie des
rentes du Québec, stop the deductions on the first pay of the month following the
month the employee was considered disabled
• if the employee began collecting a CPP retirement pension, was over the age of 65
and filed a CPT30 - Election to Stop Contributing to the Canada Pension Plan, or
Revocation of a Prior Election form, the contributions should cease the first pay of the
month following the month the employer received the completed form
• an employee cannot file a revocation to start contributing to the CPP in the same
calendar year in which they made an election to stop contributing to the CPP. In other
words, an employee cannot start and stop paying CPP contributions during the same
calendar year.
• the QPP contributions do not stop at age 70 or when the employee receives a
retirement pension; they do stop when the employee is considered disabled by the
Canada Pension Plan or the Régie des rentes du Québec

Chapter 3
Year End Federal
Content Review
• The Pensionable and Insurable Earnings Review (PIER) is a Canada Revenue Agency
(CRA) document that is produced as a result of an audit check performed by the CRA
after receipt of an employer’s T4 Summary.
• The purpose of the audit check is to identify any deficiencies in Canada Pension Plan
(CPP) contributions and Employment Insurance (EI) premiums.
• Several situations might cause a CPP contribution deficiency:
o not all the earnings reported in Box 14 are pensionable, but the same amount
is reported in Box 26
o taxable benefits and allowances were added to the employee’s record after the
last pay of the year was processed
o manual cheques were issued with no CPP contributions withheld
o the employee was set up in the system incorrectly
o the amount reported in Box 14 includes a non-cash taxable benefit when no
cash remuneration was paid in a pay period; therefore, no CPP contributions
could be withheld
• Several situations might cause an EI premium deficiency:
o not all the earnings reported in Box 14 are insurable, but the same amount is
reported in Box 24
o if an individual has more than 40% of the voting shares of the organization,
then their earnings are not insurable; in this case, an “X” should be entered in
Box 28, EI exempt
o cash allowances and cash taxable benefits were added to the employee’s
record after the last pay for the year had been processed
o manual cheques were issued with no EI premiums withheld
o the employee was set up in the system incorrectly
• The most common reporting errors occur when amounts are not correctly reported in
the following boxes on the T4 slip:
o Box 24, EI insurable earnings
o Box 26, C/QPP pensionable earnings
o Box 28, Exempt (C/QPP or EI)

Chapter 3
Review Questions
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
contribution deficiency.
23. Provide two examples of situations that would result in an Employment Insurance
premium deficiency.

Chapter 3
Year End Federal
Filing Methods for Information Returns

There are various methods available for filing information returns:
• Internet file transfer

• T4 Web forms
• Paper
The number of each type of slip filed will determine which filing method must be used.
NUMBER OF ELECTRONIC
PAPER FILING T4 WEB FORMS
SLIPS FILING1
1 – 50   
51 – 100  
101 and more 
1
If electronically filing more than 150MB, use either a compressed file or divide the transmission so
each submission is no more than 150MB.
Internet File Transfer

The CRA requires electronic filing in XML format for an employer or their representative
(service provider) who files more than 50 (per slip type) T3, T4, T4A, T4A-NR, T4RSP, T5,
T5007, T5008, T5018, or NR4 information slips (and other forms, see the CRA’s website for
more details). Additional or amended slips may also be submitted in this format.
The penalty amounts for failing to file electronically may be assessed as follows:
NUMBER OF SLIPS PENALTY

51 to 250 $250
251 to 500 $500
501 to 2,500 $1,500
2,501 or more $2,500

Chapter 3
T4/T4A Web Forms

T4 Web forms can be used to file 1 to 100 original or amended slips. With this method, filers
can create electronic T4, T4A and T5 information returns, validate data, calculate totals for
the summaries, use the electronic data to print summaries and employee slips, and securely
submit encrypted returns over the Internet.
Paper Filing
Employers are allowed to submit up to a maximum of 50 T4, 50 T4A and 50 T5 slips on
paper, as each form type will be treated separately.
Paper T4 and T4A information slips are available from the Canada Revenue Agency (CRA)
in the following formats:
• single page slips that are pre-printed, intended for laser or ink jet printers
• PDF copies that can be printed from the CRA website
• slips that can be filled in online at the CRA website and printed on white paper
One copy of each paper T4 slip and the T4 Summary is mailed to the appropriate taxation
centre.
T4/T4A Filing and Information Slip Distribution

Regardless of the filing method used, all information slips must be filed with the CRA and
distributed to employees by the last day of February of the year following the taxation year
being reported. The penalty for failing to file T4/T4A slips or for failing to distribute slips to
recipients by the due date is the greater of $100 or a penalty determined as follows:
NUMBER OF LATE PENALTY MAXIMUM

INFORMATION PENALTY
RETURNS (SLIPS) (PER DAY) (100 DAYS)
1-5 N/A $100 flat penalty
6 - 10 $5 $500
11 - 50 $10 $1,000
51 - 500 $15 $1,500
501 - 2,500 $25 $2,500
2,501 - 10,000 $50 $5,000
10,001 or more $75 $7,500

Chapter 3
Year End Federal
Employees must receive their T4 slip by one of the following methods:
• one copy distributed electronically

• two copies sent by mail to the last known address, or
• two copies delivered in person
Electronic T4 Slips
The employer can distribute the employee copy electronically without prior consent when
certain conditions are met. Consent for the electronic distribution of the T4 slips is not
required, provided that the employer issues the T4 slip to the employee by the last day in
February following the tax year to which the T4 slip applies.
The conditions for issuing an electronic T4 are:
• the slip is accessible through a secure electronic portal

• a secure site for printing the T4 slip is available, and
• there is an option to receive paper copies of the T4 slip upon request
However, an employer has to provide Copy 2 of the T4 slip to an employee when:
• the employer does not satisfy one or more of the conditions listed above unless
consent has already been obtained from the employee in respect of the T4 slip
• the employee has requested the T4 slip be provided in paper format
• at the time the T4 slip is issued, the employee is on an extended leave or is no longer
an employee of that employer; or
• the employee cannot reasonably be expected to have access to obtain the T4 slip
electronically
Due to the sensitive information that a T4 slip contains, the electronic copy must be provided
through a secure portal. General email communication does not contain sufficient security
features to permit the slip to be sent via email.
The employer must keep a copy of the T4 slips and a copy of the Summary of Remuneration
Paid for their files.
Amending Information Returns

The method used to file an amended return (adding, cancelling or amending slips) is based on
the number of total slips. This total includes both original and amended slips.

Chapter 3
Amending or Cancelling Electronic Slips

Amendments can be filed through T4 Web forms and Internet File transfer options,
depending on the number of amended slips filed.
To use the electronic method to amend or cancel slips, all of the following conditions must
be met:
• the electronic file must include amended and cancelled slips only - no original slips
• the summary and transmittal must indicate the slips are amended - not original
• the file format must be in Extensible Markup Language (XML) as specified in the
Electronic Media Specifications
• the file name must have the extension specified in the Electronic Media specifications
• the filer number (Business Number; Filer Identification Number) must be valid
Amending Paper Slips

Errors on a paper information slip that are discovered before the slip is filed can be corrected
by preparing a new slip and removing the incorrect slip from the return; the Summary should
also be corrected, if necessary.
If an error is identified after the paper information return has been filed, the incorrect slips
are voided or cancelled, and new slips are issued. The new slip must be completed in its
entirety, and the word “AMENDED” should be written on the top of the new slip. All of the
correct information shown on the original slip must appear on the amended one, along with
the corrected information.
Use the following amendment procedure:
• file one copy of any amended slip with the Canada Revenue Agency, along with a
letter explaining the reason for the amendment
• do not submit an amended summary form with an amended slip
• be sure to quote the payroll account number the slips are being reported under
• send the payment of any remittances owed as a result of the amendments
• two copies should be sent to the employee as soon as possible in the same way the
originals were sent
• retain one copy in the employer’s files
Cancelling Paper Slips

To cancel a paper information slip after submission, issue a photocopy of the original form
clearly marked with the word “CANCELLED” to the Canada Revenue Agency. Issue two
copies to the affected employee with the word “CANCELLED” written on the slip. Do not
submit an amended Summary form.

Chapter 3
Year End Federal
Replacing Slips
If an employee requires additional copies of an information slip, provide them with a copy
clearly marked with the word “Duplicate”. Photocopies are acceptable. There is no
requirement to file duplicate copies with the Canada Revenue Agency.
Customized Forms
The CRA allows employers to prepare and use customized information slips. The customized
forms must comply with CRA specifications to be processed by the tax centre. Employers do
not require CRA approval for most customized forms, including T4 and T4A slips and
summaries.
All customized forms must resemble the official CRA forms and adhere to their
requirements.
Information Circular 97-2R16 (Customized Forms) outlines the specifications for the CRA’s
custom designed slips and summary forms.

Chapter 3
Content Review
• There are various methods available for filing information returns:
o Internet file transfer
o T4 Web forms
o Paper
• The CRA requires electronic filing in XML format for an employer or their
representative (service provider) who files more than 50 (per slip type) T3, T4, T4A,
T4A-NR, T4RSP, T5, T5007, T5008, T5018, or NR4 information slips
• T4 Web forms can be used to file 1 to 100 original or amended slips.
• Employers are allowed to submit up to a maximum of 50 T4, 50 T4A and 50 T5 slips
on paper, as each form type will be treated separately.
• All information returns must be filed with the CRA and distributed to employees by
the last day of February of the year following the taxation year being reported.
• The method used to file an amended return (adding, cancelling or amending slips) is
based on the number of total slips. This total includes both original and amended
slips.
• Errors on a paper information slip that are found before the slip is filed can be
corrected by preparing a new slip and removing the incorrect slip from the return; the
Summary should also be corrected, if necessary.
• If an error is identified after the paper information return has been filed, the incorrect
slips are voided or cancelled, and new slips are issued. The new slip must be
completed in its entirety, and the word “AMENDED” should be written on the top of
the new slip. All of the correct information shown on the original slip must appear on
the amended one, along with the corrected information.
• The CRA allows employers to prepare and use customized information slips.

Chapter 3
Year End Federal
Review Questions
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 must approve any customized T4 information slips developed by
an organization.

Chapter 3
Preparing for the New Year

While employers may be finalizing the year-end process into February, there are items
relating to the new year’s payroll that should be addressed either before or at the beginning of
the new calendar year.
• Employees who claim an amount other than basic on their federal and provincial TD1
forms should be advised to review the information on their forms and complete new
ones if the circumstances affecting their claim code have changed.
• Commissioned employees who have a federal TD1X form on file should be advised
that they must complete a new form before January 31st.
• Transfer any year-to-date accruals, such as vacation accruals and loan balances, to the
year-to-date totals for the new year’s payroll. All other totals should be cleared.
• Review the number of weekly (53 instead of 52) or bi-weekly (27 instead of 26) pay
periods in the year.
• Remove terminated employees from the active file.
• Ensure the new rates for CPP contributions, EI premiums and income tax have been
updated for the first payroll run of the new year.
• Determine if there are employees who will reach age 18 or 70 during the year.
• Review the expiration date for any letters from the CRA that authorize a reduction in
an employee’s taxable income. These authorizations are often only valid for a
calendar year; if this is the case, advise the employee to apply for a new letter.
• Prepare a payroll calendar highlighting important events such as:
o pay dates
o pay period ending dates
o payroll input dates
o deadlines for receipt of payroll information from other departments
o remittance due dates
o statutory and organization holidays
o bank holidays
o payroll staff scheduled vacation dates

Chapter 3
Year End Federal
53 Weekly and 27 Bi-weekly Pay Periods

Every seven years, the calendar days fall in such a way that there can be 53 weekly pays in
the year rather than 52, depending on which day of the week is the payday. In this case, the
weekly pay period Canada Pension Plan basic exemption must be recalculated to ensure that
the annual maximum of $3,500.00 is not exceeded. The pay period exemption that must be
used is calculated by dividing the annual basic exemption by 53 rather than 52.
CPP exemption: $3,500.00 = $66.03

53
Similarly, every eleven years, there will be 27 bi-weekly pays in the year rather than 26. In
this case, the bi-weekly CPP basic exemption that must be used is calculated as:
CPP exemption: $3,500.00 = $129.62

27
The payroll system must be updated to reflect the pay period exemption for the year.
Organizations that have their payroll processed by a payroll service provider must advise the
provider to change the exemption. At the start of the next payroll year, the CPP exemption
must be changed back to the regular weekly or bi-weekly exemption.
All taxable benefits, allowances and deductions should be examined to determine if

adjustments are required as a result of the extra pay period.
Communicate New Rates

By mid-December, the new rates for Canada Pension Plan contributions and Employment
Insurance premiums will be available. This information should be provided to those in the
organization responsible for the budget process. Employers’ costs for CPP contributions and
EI premiums must be factored into the budget as they are part of the organization’s expenses
for the year.
Employees should also be advised of the changes they can expect on their first pay of the
year. Informing employees before they receive their pay may eliminate some of the questions
that are often a result of the employees being unaware that tax rates change from year to year.
Information on the new rates can be used to illustrate to employees what they can expect on
the first pay of the year. Employees should also be reminded that statutory deductions for
CPP contributions and EI premiums restart at the beginning of the taxation year, as some
employees may have reached the maximum during the previous year.
The communication could also include a reminder to employees to complete new TD1 and
TD1X forms, if required, as well as to advise payroll of any change of address. This will
assist with the preparation of T4 slips, as employees often move throughout the year and
neglect to inform payroll.

Chapter 3
Content Review
• Employees who claim an amount other than basic on their federal and provincial TD1
forms should be advised to review the information on their forms and complete new
ones if the circumstances affecting their claim code have changed.
• Commissioned employees who have a federal TD1X form on file should be advised
that they must complete a new form before January 31st.
• Review the number of weekly (53 instead of 52) or bi-weekly (27 instead of 26) pay
periods in the year.
• Review the expiration date for any letters from the CRA that authorize a reduction in
an employee’s taxable income.

Chapter 3
Year End Federal
Review Questions
26. List three items that should be addressed in preparation for the new payroll year.
27. What does an organization need to do if they have 53 weekly pay periods in the year?

Chapter 3
Chapter Review Questions and Answers

1. What is the purpose of doing a reconciliation of the Canada Revenue Agency
remittances?
Reconciling the Canada Revenue Agency (CRA) statements regularly helps the
employer identify and correct any discrepancies between what was deducted and
remitted and what was reported as received by the CRA.
2. True or False. Payments remitted to the Canada Revenue Agency during the year are
debited to the employer’s source deductions account.
False. Payments remitted during the year are credited to the 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?
If adjustments for a manual cheque are not made when the cheque is issued, the
employee may be in a situation where they have over-contributed to the Canada
Pension Plan or Employment Insurance.
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

Chapter 3
Year End Federal
6. Complete the following chart by indicating the pension adjustment formula.

TYPE OF PLAN
PENSION ADJUSTMENT
Combination Plan Total of all pension credits for each component
Defined Contribution Pension Employer contributions + employee
Plan (or Money Purchase) contributions + reallocated forfeitures +
additional voluntary contributions (AVCs)
Deferred Profit Sharing Plan Employer contribution + reallocated forfeitures
Defined Benefit Pension Plan (9 x benefit entitlement) - $600
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.
Pension adjustment = Employer contributions + employee

contributions + reallocated
forfeitures + additional voluntary contributions
Employee contribution = $63,000.00 x 2%

= $1,260.00
Employer contribution = $1,260.00 x 50%

= $630.00
Pension adjustment = $1,260.00 + $630.00

= $1,890.00
b. Genny Fowler is a member of a defined benefit pension plan that has a flat monthly
benefit of $23.00.

= $23.00 x 12
= $276.00
Pension adjustment = (9 x benefit entitlement) - $600.00

= (9 x $276.00) - $600.00
= $2,484.00 - $600.00
= $1,884.00

Chapter 3
c. Laurence Lamont is a member of a defined benefit pension plan that has a pension
benefit of 2% of the career average earnings. The career average earnings are
$73,500.00.

= $73,500.00 x 2%
= $1,470.00
Pension adjustment = (9 x benefit entitlement) - $600.00

= (9 x $1,470.00) - $600.00
= $13,230.00 - $600.00
= $12,630.00
d. Joshua Anthony is a member of a defined benefit integrated pension plan with the
following formula:
• 2% of the average best 5 years of earnings up to the 3-year average of the YMPE
plus
• 4% of the average best 5 years of earnings that are above the 3-year average of the
YMPE
For the current year’s pension adjustment calculation, Joshua’s average earnings were
$80,000.00; the 3-year average of the YMPE is $66,600.00.
Plan $80,000.00
member’s
pensionable
earnings
Year’s $66,600.00
Maximum
Pensionable
Earnings
Benefit 1.5% x $66,600.00 = $ 999.00

Entitlement
2.0% x $13,400.00 = $ 268.00
= $1,267.00
Pension Adjustment:
( 9 X $1,267.00 ) - $600.00 = $10,803.00

Chapter 3
Year End Federal
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?
Four - employees who worked in more than one province during the year must have
a separate T4 slip for earnings and deductions for each province in which they were
employed.
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
42 Employment commissions
78 Fishers – Gross income
34 Personal use of employer’s automobile or motor vehicle
40 Other taxable allowances and benefits
71 Indian employee
36 Interest-free and low-interest loans
38 Security options benefits
66 Eligible retiring allowances

Chapter 3
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.
T4 BOX/
TOTALS
CODE
Vacation pay $ 5,769.24 14/24*/26*
Home purchase loan interest non-cash taxable benefit $ 1,956.25 14/26*/36
benefit
Employer contributions to employee’s RRSP $ 2,600.00 14/24*/26*/40
Income tax $25,342.17 22
Group term life insurance non-cash taxable benefit $ 1,200.00 14/26*/40
NATIONAL BEARINGS
ALBERTA
91,828.82 25,342.17
AB !Undefined !Undefined
B k k B k k
695 830 422
!Undefined
B k k
1,002.45
LAUZON TERESA
34 5,303.33 36 1,956.25 40 3,800.00

Chapter 3
Year End Federal
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.
T4 BOX/
TOTALS
CODE
Performance bonus $15,000.00 14/24*/26*
Home purchase loan interest non-cash taxable benefit $ 1,629.63 14/26*/36
Employer-provided automobile non-cash taxable benefit $ 8,620.00 14/26*/34
Country club membership non-cash taxable benefit $ 5,441.40 14/26*/40
Employee RPP contributions (plan #9876589 – Box 50) $ 5,800.00 20/52
Employer contributions to an RPP $ 2,900.00 52
Income tax $59,749.87 22
Charitable donations $ 2,400.00 46
NATIONAL BEARINGS
129,891.03 59,749.87
BC !Undefined !Undefined
B k k B k k
788 444 999
!Undefined
B k k
1,002.45
CRANE CRYSTAL
5,800.00 2,400.00
8,700.00 9876579
34 8,620.00 36 1,629.63 40 6,641.40

Chapter 3
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 employment was terminated in November of this year. When employment was
terminated, John was fully vested in the company’s defined contribution registered
pension plan, which was joined in July 1984. Upon termination, John received a retiring
allowance of $86,000.00. John had the employer transfer the entire eligible amount to an
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.
T4 BOX/
TOTALS
CODE
Performance bonus $ 35,000.00 14/24*/26*
Commissions $ 56,923.00 14/24*/26*/42
benefit
Employee contributions to an RPP (plan #3589562) $ 3,810.00 20/52
– Box 50
Employer contributions to an RPP $ 3,810.00 52
Income tax $101,356.00 22
Charitable donations $ 1,600.00 46
The eligible amount of the retiring allowance is calculated as follows:
Calculate the number of applicable years for each of the two categories as per the
provisions.
• $2,000.00 for each calendar year, or part year, before 1996 in which the
individual was employed with the organization:
July 1982 to December 1995 = 14 years

Chapter 3
Year End Federal
• $1,500.00 for each year or part year of service, before 1989, that the
employee:
o did not belong to a registered pension plan, pension fund or deferred
profit sharing plan (DPSP)
o did belong to a registered pension plan, pension fund or DPSP, but
was not fully vested for the pre-1989 years when receiving the retiring
allowance
Calendar years 1982 - 1983 = 2 years
Calculate the amount eligible for transfer to an RPP or RRSP.
$2,000.00 x 14 years $28,000.00

$1,500.00 x 2 years + 3,000.00
Eligible amount $31,000.00 – Code 66
Subtract the total of step 2 from the total amount of the retiring allowance to
determine the non-eligible amount.
Retiring Allowance $86,000.00

Eligible amount - 31,000.00
Non-eligible amount $55,000.00 – Code 67
Calculate the income tax withheld on the non-eligible amount paid in cash.
Non-eligible amount $ 55,000.00

Lump-sum tax rate x 0.30
Tax withheld $ 16,500.00
YTD tax withheld $101,356.00

+ 16,500.00
Total tax withheld $117,856.00 – Box 22

Chapter 3
PRINCE PACKAGING 2023

ANTIGONISH NS
225,810.00 117,856.00
NS !Undefined !Undefined
B k k B k k
222 555 777
!Undefined
B k k
1,002.45
FRAME JOHN
3,810.00 1,600.00
7,620.00 3589562
34 5,237.00 40 1,650.00 42 56,923.00
66 31,000.00 67 55,000.00
15. True or False. A paper copy of the T4 Summary form is required, regardless of the
method used to file the T4 slips.
False. If the Canada Revenue Agency copies of the T4 slips are filed electronically, a
paper copy of the summary form is not submitted.
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: $394,720.44
Box 80: Enter the total of the amounts reported on lines 16, 18, 19, 22 and 27 of the
T4 Summary.
Box 16: Employee CPP contributions $45,985.72
Box 18: Employee EI premiums 38,922.84
Box 19: Employer’s EI premiums 48,186.48
Box 22: Employee income tax 394,720.44
Box 27: Employer’s CPP contributions 45,985.72
Box 80: Total $573,801.20

Chapter 3
Year End Federal
17. Complete the following chart with the correct box or code number for a T4A slip.
BOX # INFORMATION REQUIRED

018 Lump-sum payments
048 Fees for services
013 Recipient’s account number
028 Other income
106 Death benefits
022 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 Scholarships, bursaries, fellowships, artists’ project grants, 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, who 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.

Chapter 3
STEP ACTION
1 Subtract $10,000.00 from the death benefit being paid 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 withhold.
Income tax = $14,000.00 x 20%

= $ 2,800.00
Net payment $24,000.00

- 2,800.00
$21,200.00

Chapter 3
Year End Federal
20. When does an employer need to submit a paper copy of the T4A Summary form?
If paper T4A slips are used, a paper T4A Summary is sent to the appropriate
Taxation Centre, along with copy 1 of the paper T4A slips. If the T4A slips are filed
electronically, a paper copy of the summary form is not required to be submitted.
21. What is the purpose of the Pensionable and Insurable Earnings Review audit check?
The purpose of the audit check is to identify any deficiencies in Canada Pension
Plan contributions and Employment Insurance premiums.
22. Provide two examples of situations that would result in a Canada Pension Plan
contribution deficiency.
Several situations might cause a CPP contribution deficiency:
• Not all the earnings reported in Box 14 are pensionable, but the same amount
is reported in Box 26
• Taxable benefits and allowances were added to the employee’s record after
the last pay of the year was processed
• Manual cheques were issued with no CPP contributions withheld
• The employee was set up in the system incorrectly
• The amount reported in Box 14 includes a non-cash taxable benefit when no
cash remuneration was paid in the pay period; therefore, no CPP
contributions could be withheld
23. Provide two examples of situations that would result in an Employment Insurance
premium deficiency.
Several situations might cause an EI premium deficiency:
• Not all the earnings reported in Box 14 are insurable, but the same amount is
reported in Box 24
• If an individual has more than 40% of the voting shares of the organization,
then their earnings are not insurable; in this case, an “X” should be entered
in box 28, EI exempt
• Cash allowances and cash taxable benefits were added to the employee’s
record after the last pay for the year had been processed
• Manual cheques were issued with no EI premiums withheld
• The employee was set up in the system incorrectly

Chapter 3
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 must approve any customized T4 information slips developed by
an organization.
False. Employers do not require CRA approval for most customized forms,
including T4 and T4A slips and summaries.
26. List three items that should be addressed in preparation for the new payroll year.
• Employees who claim an amount other than basic on their federal and provincial
TD1 forms should be advised to review the information on their forms and
complete new forms if the circumstances affecting their claim code have
changed.
• Commissioned employees who have a federal TD1X form on file should be
advised that they must complete a new form before January 31st.
• Transfer any year-to-date accruals, such as vacation accruals and loan balances,
to the year-to-date totals for the new year’s payroll. All other totals should be
cleared.
• Review the number of weekly (53 instead of 52) or bi-weekly (27 instead of 26)
pay periods in the year.
• Remove terminated employees from the active file.
• Ensure the new rates for CPP contributions, EI premiums and income tax have
been updated for the first payroll run of the new year.
• Review the expiration date for any letters from the CRA that authorize a
reduction in an employee’s taxable income. These authorizations are often only
valid for a calendar year; if this is the case, advise the employee to apply for a
new letter.
• Prepare a payroll calendar highlighting important events such as:
o pay dates
o pay period ending dates
o payroll input dates
o deadlines for receipt of payroll information from other departments
o remittance due dates

Chapter 3
Year End Federal
o statutory and organization holidays

o bank holidays
o payroll staff scheduled vacation dates
27. What does an organization need to do if they have 53 weekly pay periods in the year?
The weekly pay period Canada Pension Plan basic exemption must be recalculated
to ensure that the annual maximum of $«CPP_exempt» is not exceeded. The payroll
system must be updated to reflect the new exemption for the year.

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Chapter

Upon completion of this chapter, you should be able to:

1. Reconcile payroll registers to accounting ledgers and the Canada Revenue

© National Payroll Institute – Payroll Fundamentals 2 3-1

© National Payroll Institute – Payroll Fundamentals 2 3-2

The material in Payroll Fundamentals 2 provides information relating to the year-end

© National Payroll Institute – Payroll Fundamentals 2 3-3

PAYROLL AND ACCOUNTING PRACTICES

© National Payroll Institute – Payroll Fundamentals 2 3-4

 Review the following pension adjustment (PA) matters:

GUIDES, PENALTIES AND PROCEDURES

© National Payroll Institute – Payroll Fundamentals 2 3-5

• source deductions withheld from employees for:

As discussed in the chapter on federal remittances, an employer can use a spreadsheet to

© National Payroll Institute – Payroll Fundamentals 2 3-6

The information on the cheque is:

Gross Earnings $4,755.00

© National Payroll Institute – Payroll Fundamentals 2 3-7

Journal entry # 1240

Journal entry # 1241

© National Payroll Institute – Payroll Fundamentals 2 3-8

T4 and T4A Reconciliations

Credit balance on the current year PD7A ($437,475.00)

© National Payroll Institute – Payroll Fundamentals 2 3-9

Reconcile Remittances to Employee Year-to-Date Totals

• gross taxable income

Taxable Benefit Adjustments

© National Payroll Institute – Payroll Fundamentals 2 3-10

Update Employee Records

© National Payroll Institute – Payroll Fundamentals 2 3-11

© National Payroll Institute – Payroll Fundamentals 2 3-12

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

© National Payroll Institute – Payroll Fundamentals 2 3-13

Pension Plan Reporting

Pension Adjustment Glossary

Benefit entitlement = Final average earnings x benefit percentage rate

© National Payroll Institute – Payroll Fundamentals 2 3-14

Benefit entitlement = Career average earnings x benefit percentage rate

Benefit entitlement = Flat benefit amount x number of months

Benefit Entitlement Limit

© National Payroll Institute – Payroll Fundamentals 2 3-15

Pension Adjustment Formula

Pension Adjustment = (9 x benefit entitlement) - $600.00

© National Payroll Institute – Payroll Fundamentals 2 3-16

Pension Adjustment Calculations

*Additional Voluntary Contributions (AVCs):

Defined Benefit Pension Plan

(9 x benefit entitlement) - $600.00

© National Payroll Institute – Payroll Fundamentals 2 3-17

Defined Benefit - Flat Benefit Plan

Benefit entitlement = Flat benefit amount x number of months

( 9 X $180.00 ) - $600.00 = $1,020.00

Defined Benefit - Flat Benefit Plan

( 9 X $154.50 ) - $600.00 = $ 790.50

© National Payroll Institute – Payroll Fundamentals 2 3-18

Defined Benefit - Final Average Earnings Pension Plan

Benefit entitlement = Final average earnings x benefit percentage rate

( 9 x $600.00 ) - $600.00 = $4,800.00

Defined Benefit - Final Average Earnings Pension Plan

Benefit entitlement = Final average earnings x benefit percentage rate

( 9 x $3,506.67 ) - $600.00 = $30,960.03

© National Payroll Institute – Payroll Fundamentals 2 3-19

Defined Benefit - Career Average Earnings Pension Plan

Benefit entitlement = Career average earnings x benefit percentage rate