Whether you work with an accountant or you use a payroll software solution like Knit to manage your company's payroll, wrapping up the fiscal year can be an overwhelming process. To prevent any panic-induced tears, we’ve put together a handy year-end payroll compliance checklist to help you avoid common mistakes and keep the CRA happy.
1. Review Employee Information
One of the biggest mistakes that employers make is entering incorrect employee information. Luckily, Knit makes it easy to edit employee information en masse with our Mass Changes feature. To see if you need to make any changes, you’ll want to check the following for accuracy:
● Social Insurance Numbers (SINs)
● First and last names
● Tax province codes
Additionally, you will also want to check if an employee is classified as an employee or a self-employed individual. In the event that you improperly classify an employee and fail to withhold the proper tax amounts, you may be subject to penalties and/or interest.
2. Verify Your BN
When you register your business with the government, you receive a unique Business Number (BN) for your company. You’ll want to double (even triple) check that this number is correct when setting up your payroll with your provider, as all of your tax remittances are paid out to the payroll account associated with your company.
3. Handle Statutory Holiday Payouts
In Canada, the following public holidays apply to all provinces and territories unless otherwise noted.
● New Year's Day
● Good Friday
● Victoria Day
● Canada Day
● Civic Holiday (all except Quebec and Yukon)
● Labour Day
● Thanksgiving Day
● Remembrance Day
● Christmas Day
● Boxing Day
There are also a number of holidays that only apply to specific provinces and territories. Employers are legally required to pay out statutory holiday pay for employees who work on those holidays. However, requirements can vary by province or territory. Check to make sure that if employees meet eligibility requirements, they have been paid out for all holidays.
4. Review WCB and WSIB Account Numbers and Rates
If your company is required to register for Workers' Compensation, you will be assigned an account number and a percentage rate by your provincial Workers’ Compensation Board (WCB). Check both the account number and rates, while also making sure that all applicable employees are enrolled in the program. If you are using Knit, you can verify that you have entered the right WSIB account number by going to the WSIB Setting under the Company Tab.
Additionally, you'll want to catch up on all Workplace Safety & Insurance Board (WSIB) reporting, as the employer is the one responsible for completing and submitting these reports. You should also confirm your reporting frequency with your provincial Workers' Compensation Board.
5. Review Outstanding Payroll Entries
Review any outstanding payroll entries dated in the calendar year. This can include manual cheques and deposits. Then make sure that these entries have been included in the current taxation year. Additionally, ensure that all canceled payroll journals and canceled paycheques are not included in year-end figures. You may also want to consult with accounts payable to account for any personal expenses and other miscellaneous expenses reimbursed to employees.
6. Verify That Your CRA Statement of Account Matches Your Remittances Paid Out To Date
If you are using Knit as your payroll provider, you can request a Receiver General Report that outlines all the remittances done by Knit during the year (remittances completed with other payroll providers or on your own will not appear). You should compare that report with the Statement of Account you receive from the CRA. This comparison will help you spot any missed remittances, detect over or underpayments, and catch up your payments before you incur any serious penalties.
7. Update Your Company’s EI, HSF, or EHT Rates
If you get reduced rates for Employment Insurance (EI), Health Services Fund (HSF), or Employer Health Tax (EHT), you must notify your payroll provider to ensure that there are no discrepancies at year-end.
8. Review YTD and Accrued Vacation Amounts
The Year-to-Date (YTD) amounts are mainly applicable to companies who are switching payroll providers. The YTD amounts have to be entered for all employees who are on payroll, especially if they have been paid previously in the year. These amounts all tally up at the end of the year and are reflected in the T4s/T4As. Keep in mind that if your YTD amounts are incorrect, you may end up overpaying taxes and other source deductions.Moreover, you should also review accrued vacation amounts. With Knit, vacation accrued is the vacation earned, while YTD vacation pay is what was paid out. Simply find the difference between the two in order to find the outstanding vacation liability.
Though year-end can be a stressful time, keeping this handy year-end payroll compliance checklist around can help to streamline the process. Of course, if you ever need a hand to guide you through the process, don’t hesitate to reach out to Knit’s dedicated support team at firstname.lastname@example.org or 1-(877)-763-8808.