As the year winds down, a familiar sense of anticipation fills the air.

For small business employers, this often comes with a hint of stress, knowing that it’s time to tackle the year-end payroll process. Whether you’re a seasoned payroll veteran or a newcomer bracing for your first year-end payroll journey, staying calm is essential.

In this article, we will help you demystify the year-end payroll process, and master all the tasks to ensure you can have a smooth year-end.

Step 1 — Preparing for Your Year-End Payroll Processing

Before you jump into the complex maze, step back and take a few minutes to make a plan. Here’s the basic steps.

• Gather Your Documents: Set up a designated folder for all your year-end
  payroll documents. This simple step can save you a ton of time when you start
  the year-end wrap-up.
• Identify Essential Forms: T4, T4A, T5018, RL-1.
• Download Guides and Forms: From the Canada Revenue Agency (CRA) and
  the Revenu Québec websites.
• Mark the Calendar: Be aware of all crucial payroll filing deadlines and the consequences of missing them.

Step 2 — Balancing and Reconciling Your Year-End Payroll

As the year draws to a close, it’s time to ensure that your remittances match up with the records held by the authorities. This includes:

• Income Tax (Federal and Provincial)
• Employment Insurance Canada Pension Plan (CPP) or QPP in Québec
• Review Payroll Setup: Verify the earnings accuracy, taxable benefits, and deductions. Ensure that taxable benefits are accurately applied and adjusted.
  Adjustments might be needed to reflect any updates related to cheques that were issued manually or canceled.

Step 3 — Filing T4s & T4 Summary

The T4 slip is also known as the Statement of Remuneration Paid. It summarizes the total employment income, CPP contributions, EI premiums, and deducted income tax. It’s required for every individual who earned income during the year, regardless of their employment status.

• Confirm the Due Date: For 2023, this falls on February 29, 2024. (Happy Leap Year!). That’s the deadline for delivering the T4 to the employees.
• Delivery Methods: Sending two copies via mail, hand-delivering in person, or distributing one copy electronically by mail.
• Choose Your Filing Method:
  • Paper Filing Option: If you have 1 to 5 T4 slips.
  • Online Filing: More than 5 T4 slips. Online filing is mandatory for companies filing more than 5 T4 slips. Options include Web Forms and Internet file transfers (XML).
    Note: Businesses filing paper returns for more than 50 slips are subject to electronic filing penalties.

Step 4 – Say Good Bye 2023 and Hello 2024

Setting up for the new payroll year is about staying current and compliant with ever-changing payroll rates and regulations.

• Review Your Payroll Calendar: 2024 is a leap year and that adds an extra pay period for weekly and bi-weekly pay frequency. It’s called a 53/27 pay year
• Look for Conflicts between payroll processing, payday, and statutory holidays.
• Update Employee Files with any applicable tax credits or reductions that employees may qualify for before the new year arrives.

The Importance of Accuracy in Year-End Processing

Why it matters:

Payroll mistakes lead to penalties or legal issues. Accurate processing contributes to employee satisfaction and lays a solid foundation for the upcoming year.

Those processing their payroll manually need to be extra attentive to the little details and pay special attention by double and triple checking every calculation. Payroll software programs can simplify your work and deliver reliably accurate results.

What’s new for 2024?

Changes to CPP pensionable earnings and contributions take effect on January 1, 2024.

• Maximum pensionable earnings under the Canada Pension Plan (CPP) will be $68,500—up from $66,600 in 2023. The basic exemption amount for 2024 remains at $3,500. A higher, second earnings ceiling of $73,200 will be implemented for second additional CPP contributions (CPP2). As a result, pensionable earnings between $68,500 and $73,200 are subject to CPP2
  contributions.
• T4 Changes:
  • Box 16A-Employee’s Second CPP Contributions (CPP2): For T4 slips of2024 and beyond, indicate the CPP2 contributions deducted from your employee in box 16A when reporting in box 10 that your employee’s province of employment is other than Quebec.
  • New boxes on the T4 & T4A slips Starting with the 2023 tax year, details about employer-offered dental benefits must be reported. This includes:
    • T4 Box 45: Employer-Offered Dental Benefits — Mandatory for all slips
    • T4A Box 015: Payer-Offered Dental Benefits — Mandatory if you report in Box 016, Pension or Superannuation
    • Note: For calendar year 2023 only, it is not mandatory to fill out the new box when and only when code 1 is applicable, providing that reasonable efforts have been made to comply with the reporting requirements.

There are 5 code options to choose from: 

Code	When to select
1 – Not eligible to access any dental care insurance, or coverage of dental services of any kind	The employee listed on the T4 was either -ineligible for employer-provided dental benefits on December 31, or -they received dental benefits throughout the year but lost access to them by December 31 due to reasons such as the termination of employment midway through the year. or your organization does not provide any form of dental benefits.
2 – Payee only	The employee identified in the T4 was entitled to dental benefits as of December 31.
3 – Payee, spouse, and dependent children	The employee identified in the T4, along with their spouse and dependent children, were qualified for dental benefits as of December 31. This includes situations where the spouse and dependent children are eligible for coverage but have chosen not to enroll.
4 – Payee and their spouse	The employee identified in the T4 and their spouse were eligible for dental benefits on December 31. This extends to cases where the spouse is eligible for coverage but has not opted to enroll.
5 – Payee and their dependent children	The employee identified in the T4 and their dependent children were eligible for dental benefits on December 31.  This includes situations where dependent children are eligible for coverage but have chosen not to enroll.

Wrapping up  2023 Navigating the year-end payroll process requires patience, precision, and a keen eye for detail. But with a structured approach and a clear understanding of the tasks at hand, you’ll be ready to welcome the new year with confidence and calm.