Year-end payroll checklist for Small Business Owners

When it comes to payroll compliance, year-end can be a complicated and confusing time for business owners with so many forms to complete, filing deadlines to remember and details to update.

This process can be particularly daunting for small businesses still operating with paper-based systems for payroll and accounting.

Read this article to check those year-end boxes and make sure your payroll is up-to-date and accurate going into the next year.

Check current tax rules

Tax legislation changes frequently, so it’s a good idea to take a few minutes to make sure you’re working with the most recent tax guidelines.

Remember, your payroll tax responsibilities include deducting from employee paychecks the appropriate federal income tax, provincial and territorial income tax, Canada Pension Plan (CPP) contribution and Employment Insurance (EI) premium.

As an employer, you must pay an amount beyond the employee’s contribution to CPP and EI – for example, for CPP the employer matches the amount deducted from the paycheck, while for EI the employer must contribute 1.4 times the amount paid by the employee.

Visit these government websites:

• For more information about the Canada Pension Plan (CPP), visit the CRA website.
• For more information about Employment Insurance (EI), visit the CRA website.
• For more information about Federal Income Tax, visit the CRA website
• If you need to enter an additional withholding amount for your employee, speak to the CRA to check what you should do.

 

Provincial or territorial taxes

If you are unsure how to apply provincial taxes to your employees, refer to the CRA website for a list of support pages for each area.

To help figure out employee source deduction amounts, you can also use this Payroll Deductions Online Calculator from the Government of Canada.

Check employee records

Once you’re certain you have current tax information, it’s time to update your employee records with correct amounts for deductions and pay rates.

If you’re using spreadsheets or a paper-based system to manage payroll, carefully review each employee record to check you’re applying the most current source deductions.

If you’re using Sage Business Cloud Payroll, follow these steps to update an Employee record:

• Open the Employee tab & select the Employee you want to edit.
• Select whether to edit their Employee Details or their Payslip Template Values.
• To change Employee Details, edit the employee information as required and hit Save.
• To change items from the Employee’s Template Values, make your desired changes and hit Save.

Read this article for more help to create or edit an employee’s payroll information in Sage Payroll.

Check which payroll reports are due early next year

Canada Revenue Agency gives you a few weeks in the new year to prepare your year-end information return for payroll up to December 31 of the previous year.

 

End of February deadline

The Payroll Information Return contains a summary of the year and employee payroll slips. This return is due to CRA on the last day of February for the previous calendar year ended.

You must also send T4 slips to your employees by the last day of February. These slips summarize employee earnings and deductions so they can complete their income tax returns.  

Review employee pay information

Before you submit your end of year Information Return to CRA, it’s a good idea to review your records to make sure everything is in order.

• Confirm employee names are spelled correctly.
• Ensure all social insurance numbers are present and correct.
• Verify the employee mailing address.

• Check to make sure any former employees, contract workers, and short-term employees will receive final income statements.
• Ensure there are no missing payroll periods.

Keep track of payment deadlines

During the next year, don’t miss deadlines to remit your payroll deductions to the Canada Revenue Agency — otherwise you may incur interest charges and penalties.

Payments may be submitted monthly (on the 15^th day of the following month) or quarterly (on the 15^th day of January, April, July, and October).

Remember to keep your tax records

Canada Revenue Agency requires you to keep adequate records for 6 years after you file each return.

Your records must provide enough detail to determine your tax obligations and support your deductions. Keep all of your original documents well organized and available to you in case the CRA decides to audit your company

Check you’ve collected information to onboard a new employee

Whether it’s your first employee or your hundredth, you’ll need to collect certain information from a new hire in order to set them up on your payroll system.

• Personal Tax Credits Return (TD1 form) determines the amount of income tax to be deducted from the employee’s pay. Federal and Provincial TD1 forms must be filled out and signed. (You can get the forms for each province or territory here.)
• A mailing address as proof of residence.
• Social Insurance Number (SIN).
• Date of birth.
• Bank account information for direct deposit.
• Personal contact information including email and telephone phone number.
• Terms of Employment including compensation and contract duration.

Final thoughts

There’s a lot to juggle when it comes to payroll — and you likely have better things to do. Using spreadsheets to make payroll calculations opens the possibility for errors and will consume more of your valuable time.

If you decide to get a payroll solution such as Sage Business Cloud Payroll for your business, it will help you to:

• Record your employee information.
• Work out payroll tax deductions.
• Report payroll information to the government.
• Calculate and prepare government remittances.
• Identify any statutory pay requirements, like overtime.

And, if you work with an accounting professional, they’ll appreciate the way Sage Business Cloud Payroll integrates with Sage Accounting.

For most small businesses looking to eliminate payroll headaches, a cloud-based payroll solution is an easy solution because there’s no expensive upfront software purchase or complicated set-up process. The provider is responsible for keeping the software current with the latest tax rules and deadlines. And, you can access your payroll information anywhere, anytime using your browser.