As we approach the end of another calendar year, businesses must be prepared to analyze the payroll information that has been recorded to date in their system and determine its accuracy. What does this mean for you? Whether you own a small or medium sized business, take care of the payroll yourself using a payroll software, or you benefit from a payroll service provider, determining the accuracy of the information provided is a crucial step before the finalization of the production of the tax forms for any company, no matter the size.
Validating Employee/Employer Information
Make sure the address of your business, the federal business number and the provincial identification numbers have been accurately inputted. The accuracy of the employer portion of the federal and provincial deduction at source rates should also be verified. Each employee’s profile, whether active or inactive, should be validated to ensure the information contained is up to date, such as their name, address, and social insurance number.
The tax exemption amounts for both federal and provincial should be validated along with the other taxation rates such as Employment Insurance (EI), Quebec Pension Plan (QPP) and Quebec Parental Insurance Plan (QPIP). Making sure the employees have remitted the correct amount of taxes to date is very important.
If payroll is done in-house, a reconciliation of amounts paid versus amounts owing of deduction at source remittances is a great way to reveal any deficiencies that may exist. If you use a payroll service provider, many send preliminary reports in November, which underline certain deficiencies that may exist.
Ideally, all deficiencies and corrections must be reported and corrected before the last pay of the year.
Taxable Benefits and Other Adjustments
Any taxable benefit that was not already added in the payroll during the year should be added before the last payroll of the year. A car benefit or use of a company car is one example. Since the benefit is based on kilometer usage in the year, it can only really be computed at the end of the calendar year. Changes in group insurance rates and coverage is another example of what must also be monitored during the year. If changes occurred and were improperly captured, then one-time adjustments are required before the last pay of the year.
Other adjustments such as bonuses to be issued, should be done so before the end of the year and all the necessary payroll taxes must be remitted by the January 15 deadline.
Tax Forms Finalization
Once all the employee and employer information has been properly validated and all the necessary adjustments have been captured into the payroll system, the tax forms can be produced. In the event that the tax forms are produced and errors are still found, amendments are still permitted, and year-end adjustments can still be made after December 31. However, the January 15 deadline still stands as the last date to remit deductions at source. Anything remitted after this date will be considered late and, in most cases, will incur penalties and interest.
Being proactive by better understanding your payroll and how to identify anomalies is the key to providing the most accurate information possible when it comes to finalizing your payroll package and producing your tax slips.
We’re Here to Help
If you have any questions about your payroll and tax forms production, feel free to contact our Accounting and Bookkeeping team to get you on the right path.