Payroll > T4s > Balancing Your T4 Report-Addition of CPP2

 

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. 

Note that for 2024, you must deduct the second additional CPP contributions (CPP2) on earnings above the annual maximum pensionable earnings.  

For 2024, the maximum pensionable earnings is $68,500 and pensionable earnings between $68,500 and $73,200 will be subject to “second CPP contributions” (CPP2) at an employee/employer rate of 4%, with a maximum contribution of $188 each.  

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

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

  • Ensure you are using the correct rates to do your calculations. Our examples below demonstrate using the 2024 rates. See the Canada Revenue Agency links below to see the annual maximums and calculation rates. 

  • Do not print or save your final remittance report until after you have submitted the T4s and T4 Summary so that your final remittance report will match the balance owing or due showing on your T4 Summary submitted to CRA. 

Balancing T4s 

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

 

 

Close the reports once you have printed what you need. 


 2)  When we balance the T4 report, we start with Box 16, Employee’s CPP contributions (or Box 17, Employee’s QPP contributions for employers in Quebec).  You will need to determine if the amount in this box is correct.  To do this, we use a formula: 

(Box 14 - $3,500) *5.95% all except Quebec 

(Box 13 - $3,500) * 6.4% Quebec 

The income used for this calculation will exceed $68,500.  If your employee’s earnings are greater than this, another calculation is completed for the deduction of CPP2 and we will balance that next. 

In the example above, we will do this calculation: 

($72,625- $3,500.00) *5.95% = $4,112.94 (rounded to the nearest cent) 

 3) 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.  To do this, go to Payroll > Create Paycheques. Zero out all of the income and 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 $245.44.  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. 

 

4)  The maximum pensionable earnings for CPP is $68,500.  Let's say, on the T4, Box 14 is $72,625. We know based on this that Box 16 is going to max at $3,867.50.  To calculate what CPP2 in Box 16A should be: 

$72,625 - $68,500 = $4,125 * 4% = $165 

 So CPP2 should be $165.00. 

Take the amount in Box 14, subtract $68,500, and multiply by 4%.  The maximum in the box will be $188.00 

Because there is no exemption on this deduction, like there is for CPP1, no reconciliation or adjustment is required for CPP2. 

  

5)  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%. 

$72,625.00 * 1.58% = $1,147.48 

In this example, we have under 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. 

 

6)  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. 


7  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. 

 

8)  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 September 16, 2024 by FCC AgExpert 

 

 

 

Last updated on September 16, 2024 by FCC AgExpert