The T4 Tax Slip
The T4 tax slip-also known as the Statement of Remuneration Paid-is an indicator that an employee has been paid prior to deductions. These deductions include an employee’s contributions to a Canadian Pension Plan/Quebec Pension Plan, and Employment Insurance, and other fees deducted from the salary during the tax year. The T4 also shows the exact amount of an employee’s compensation, and the amount withheld and remitted to the Canada Revenue Agency. Employees use the T4 for income tax filing every year.
In the form, expect to see taxable income, its deductions from benefits and allowances, and pension plan contributions.
T4 Tax Year Limitations and Rules
The requirement for the employment income recorded on a T4 is simple: any monetary compensation paid and recorded on a T4 must be a compensation that was received within the year, not earned. For example, the payment for money earned during December 2017 must be recorded on the T4 of the following year (2018) if the payment was made and received in January 2018. Employee trust can be an exception to this, although most employees are unaffected in this aspect.
The deadline for T4 and T4A distribution and returns in a tax year is on or before the last day of February of the following year. If ever the last day of February lands on a weekend or holiday, it is considered if postmarked on the following business day.
Late submissions of the slips have a penalty of $5 to $75 for every day past the given deadline. The minimum penalty is $100, with a maximum of $7500.
Procedures and Conditions
Employers must provide 2 copies of the T4, and can be sent through mail, personal delivery, or if with the employee’s consent, e-mail. The Federal 2017 Budget, however, has proposed the removal of the consent on electronic T4s upon T4 distribution. Privacy and protective measures are required to be taken upon the use of T4, and employees are to receive paper T4 forms if requested and preferred.
For employees who had received remuneration during the year, a T4 must already be completed if deductions are done for CPP or QPP contributions, EI or Quebec PPIP premiums, income tax, or if the remuneration went over the $500 limit. When employees are provided with taxable group term life insurance benefits, an exception can be made to the $500 limit.
For former employees or retirees who are provided with the benefits from above, a T4A slip must be completed. A T4A is only required for the following taxation years for taxable group term life insurance benefits more than $50 if it is the only income reported on the T4A slip.