Balancing Your T4 Report

Each year, you are required to submit your T4 return to CRA, and issue T4 slips to all your employees.  If you do not balance your T4 summary, you may find yourself at the receiving end of a PIER review (Pensionable and Insurable Earnings Review), with corresponding interest and penalties on any amounts found payable.

Please remember the below is only an example.  The example is a farm located in Saskatchewan, so the numbers may not reflect your province.  However, the process remains the same no matter what your province of residence is.

When balancing your T4 return, keep the following in mind:

1) Balance a single T4 slip at a time.  It is easier than trying to balance all the slips at once.

2) Ensure you are using the correct rates to do your calculations.  Refer to the CRA website to get current CPP and EI rates.

3) Do not record anything until all slips are completed.

4) Do not save the balancing remittance until the T4 summary has been submitted to CRA, either electronically or by paper.

Print a copy of your T4 slips.  Do not worry about the T4 summary yet.

When we balance the T4 report, we start with Box 16, Employee’s CPP contributions.  You will need to determine if the amount in this box is correct.  To do this, we us a formula:

(Box 14 - $3,500) * 5.25%

In the example above, we will do this calculation:

($47,692.24 - $3,500) * 5.25% = $2,320.09

According to the calculation, we have under deducted CPP for this employee.  An adjustment will need to be made to make sure the CPP contribution is correct.

Create a paycheque for the employee.  Make sure the paycheque date and pay period both read December 31^st of the year you are working on.

Make sure to remove all pay type and benefit information for the employee so that the Amount and Benefits column are at $0.00 by clicking the Amount and Benefits columns and clearing them out.

In the Review section, click on CPP.  This will open your deductions screen.  We want to enter how much we want to change the T4 summary by.  In our case, that will be $109.88.  To offset this, enter the opposite amount into the Federal Tax field.  In this case, since the CPP is positive, the federal tax will be negative.

Save the deduction screen, and make sure that the net pay still shows $0.00.  Click on Save.

Go back to the employee’s T4.  We now turn our attention to Box 18, Employee’s EI premiums.  To calculate this amount, you will take the amount in Box 14 and multiply it by 1.58%.

$47,692.24 * 1.58% = $753.54

In this example, we have over remitted EI.  Create another paycheque for this employee in the same manner as we did for CPP.  This time, you will fill in the EI information, and offset it to Federal Tax.

Click on Save, make sure that the net pay is still $0.00, and save the cheque as before.

Re-generate the T4 for the employee.  You will need to download a fresh copy from the employee landing page.  The updated T4 should reflect the changes that you made with these two transactions.

Download your T4 summary to look at it.  It should now reflect either a balance due or a refund, depending on the outcome of your adjustments.

Complete all the T4s for each of your employees.  Once all your employees’ slips are balanced, submit your return to CRA as normal.

Once your submission is completed, you can do a final payroll remittance to save the amount for you to either pay or receive payment on.  This clears your payroll source deduction accounts so that you can begin fresh with the next year of payroll.

Last updated on June 10, 2020 by FCC AgExpert