T4 Summaries for businesses with multiple payroll sources
It’s T4 season, my favourite time of year. The average business owner has received a few T4s in their lifetime by the time they are responsible for preparing them on behalf of their company. But do they have experience with a T4 Summary? Maybe not.
The Employers' Guide – Filing the T4 Slip and Summary can be found on the CRA website. But I learned something new this week that I wanted to shout from the rooftops. Or maybe just include in a blog post. This will be relevant for businesses with more than one payroll source in the year.
In this case I’m using the word source to mean payroll that was processed manually by the business compared to payroll that was processed by a payroll provider like Ceridian. I have two current clients who fall into this category for two different reasons as follows:
Company A uses a payroll provider for biweekly payroll for their hourly employees. This corporation also pays the owner by payroll, but it is often booked as payroll payable, so that the expense can be included before the business sends the take home pay to the owner. In this case the business has two remittances per quarter — one by the payroll provider for the employees and one by the owner for her own remittances. The CRA can receive these remittances in two separate pieces without any issues.
Company B started the year doing payroll manually and switched to Ceridian as their payroll provider towards the end of the year. At that time, the business chose to not include former employees in the Ceridian setup, so that Ceridian was only dealing with current employees and not any employees who had worked in 2018 but had already left the company before the transition. In this case the business had two remittances per quarter for at least one quarter — one by Ceridian beginning with the first pay that was processed using their service and one by the owner for the pay periods during that quarter than came before the transition. The CRA can receive these remittances in two separate pieces without any issues.
What happens at T4 time?
Company A will have T4s prepared through their payroll provider and will create a manual T4 for the owner.
Company B will have T4s prepared through Ceridian for the current employees at the time of the transition, as year-to-date information was included at the time of the switch. They will create manual T4s for the employees who left the company before the transition
And the big question — how are the T4 Summaries handled? This is the new information I learned this week:
T4 Summaries are not like quarterly remittances — the CRA cannot accept them in multiple pieces and add them together on their end. The CRA will only accept one summary for each payroll account for the year.
If a payroll provider like Ceridian sends the CRA the T4 Summary that they have produced, it won’t include the other payroll that was prepared outside of their service, the business will receive a notice that their remittances don’t match their summary, and they will need to amend their summary to include the extra information. But all of this happens after the fact, not when the company knows they will have an issue in January. (Because they read this blog.)
The owner would need to request that the payroll provider to not submit the T4 Summary that they have prepared.
The owner would then use the T4 Summary from the payroll provider and add those totals to the manual T4 Summary they would create for the other payroll for the year, so that only one summary is submitted to the CRA, and that one summary is a true summary for the payroll account for the year.
This work around solves the problem in February and allows the business to move on to its next payroll year knowing that it won’t need to amend its T4 Summary later in the year.
Am I the only person who gets excited about learning little nuggets like this? Possibly. Am I OK with that? Definitely.
If you don’t think that T4 season is the most wonderful time of the year, remember that at least one person in your network does. And they’d be happy to help you with any of your ongoing or year-end payroll needs.
Disclaimer: Ceridian is not linked with Clearview Business Services Corp. in any formal way, except that they are the payroll provider that I recommend, and am happy to use for Company B in the example above. Any errors in this blog are Clearview’s and not Ceridian’s.
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This blog is intended for information purposes only, and is not meant to replace the services of a bookkeeper or an accountant.