Payroll year-end checklist for Canada

Take the steps provided in this guide as early as possible to ensure your 2020 filings are accurate.

At a glance

Bring everything together with reconciliation

If you pay your employees by cheque, perform a payroll reconciliation through December 31, 2020. Look for outstanding cheques and make sure you've accounted for employee expense reimbursements. Compare payroll tax withdrawals from your bank account to the amounts on your tax liability records. To review payroll taxes in Wave, go to Payroll > Taxes. For more steps and insight into year-end accounting, check out: Accounting year-end checklist.

Verify your employees' wages, benefits and personal information

Audit employee wages for EI and CPP discrepancies

Unless your employee was exempt for the whole year, or part of the year, you should deduct EI premiums and CPP contributions from each pay.

The 2020 EI rate is 1.58%. To help verify, take the amount reported in Box 24 on the T4 and multiply it by 1.58%. The amount should match what is reported in Box 18. Due to rounding it is normal for the amount to vary by a few cents. Employer portions of EI are 1.4 times the employee premiums. 

The 2020 CPP rate is 5.25%, with an annual exemption amount of $3,500. Checking CPP earnings in Box 26 against contribution in Box 16 is more complicated than it is for EI. The CRA provides a step-by-step guide to check CPP contributions. Employer portions of CPP should match employee contributions. 

The CRA provides more guidance here, if you find your CPP and EI amounts do not match.

Make sure benefits enjoyed this year are included on 2020 payroll

If you are missing a benefit and have yet to run your final 2020 payroll, you can add it to payroll before the end of the year. To do this, go to the employee profile > click Benefits & Deductions. Find more information about adding deductions, bonuses and benefits here. 

If you're missing a benefit and cannot add it to a future payroll in Wave, please contact our Support Team as soon as possible. Please include the employee name, the benefit or deduction name, and the amount.

Reflect on business structure changes this year

If you made changes to your business structure in 2020 that resulted in a new Canada Revenue Agency (CRA) Payroll Account Number (e.g. incorporating from a sole-proprietorship), you would have already submitted T4 slips with your old CRA Payroll Account number when the change occurred. Ensure wages reflected on year-end forms only include wages paid towards your new CRA Payroll Account Number. You’ll need to create a second business in Wave for your restructured business

• What to do when your business structure changes.

Report the 10% Temporary Wage Subsidy to CRA (Form PD27)

On August 4, 2020 the CRA released Form PD27, 10% Temporary Wage Subsidy Self-Identification Form for Employers to report the 10% Temporary Wage Subsidy (TWS) introduced in March 2020. All eligible employers must complete this form, regardless of whether the TWS, the Canada Emergency Wage Subsidy (CEWS), or both have been claimed. If neither subsidy has or will be claimed, it is not necessary to submit this form.

• Reporting the Ten-percent Temporary Wage Subsidy for Employers

Preview your T4 slips

Take advantage of previewing your T4 slips now to make sure you’ve entered correct wages, benefits and employee information for 2020. To preview your T4 slips, go to Payroll > Tax Forms.

• How and Why to Preview T4 Slips

Important direct deposit dates

As 2020 comes to a close, it's important to keep direct deposit timelines in mind. Payrolls and direct deposits do not process on Federal bank holidays. This means if a bank holiday falls on the day you normally approve payroll, pay employees, or anytime in between, you must approve payroll at least one business day earlier. The following dates are bank holidays to keep in mind:

December 28, 2020: The last day to approve a direct deposit payroll with a 2020 pay day. Make sure that your payroll is approved no later than 3:00PM ET on December 28, 2020 for the payroll to be reported in the 2020 tax year.

Audit your T4A contractor information

In order for contractor payments to show up on the T4A slip at year-end, the contractor must have been listed as a T4A contractor in your Vendors list. If you need to update this, here's how:

1. Under Purchases > Click Vendors
2. Select the Vendor Name
3. Click the arrow under Actions > Click Edit
4. Under the vendor name > Locate Type
5. Update the vendor type to T4A contractor Click Save

Make sure to review and confirm all contractor information is accurate. If your contractor is an Individual, ensure that their Social Insurance Number (SIN) is correct. If your contractor is a Business, ensure their CRA Account Number and Business Legal Name is correct.

Review contractor bills and bill payments

In order for contractor payments to appear on 2020 T4A slips, ensure the related bill payments in Wave are recorded as paid in 2020. Payments made to a T4A contractor totalling more than $500 in the year require a T4A slip.

If you are a construction company paying subcontractors for construction services, you will file Form T5018 Statement of Contract Payments instead of the T4A slip. For more information on this type of return, see Information for payers of the T5018.

Update employee tax profiles for 2021

January 1, 2021: If employee federal or provincial claim amounts have changed, they must submit new forms to their employer to ensure accurate payroll calculations. Otherwise, make sure tax details are up to date with the 2021 basic exemption amounts. Here's how:

1. Under Payroll > Click Employees 
2. Select Employee Name 
3. Click Tax Details

Confirm your deposit frequency for 2021

December 2020: Review notices received before the end of 2020 from the Canada Revenue Agency (CRA) with updates to your business' remittance deposit frequency. You can update this in Settings > Tax Profile. Please update this as soon as possible - you can make the effective date January 1, 2021.

Key dates: get your forms to the CRA and to your workers

February 1, 2021: T4 Slip generation is available in Wave.

February 28, 2021: This is the last day to get your T4 and T4A slips to employees and contractors. This falls on a Sunday, so if you don’t see your employees on the weekends, you should give them their forms beforehand.

March 1, 2021: This is the last day to submit T4/T4A summaries and T4/T4A slips to the CRA. Since February 28th falls on a Sunday, your slips are due the next business day.