Balancing Your T4's
4. Run the T4 Pre Validation Reporting process. This Pre-Validation process reviews and reports common data error such as incorrectly formatted Postal Codes that will prevent the T4 XML files from being accepted by CRA. Review the report, adjust your data as needed and rerun this process. You MUST rerun this process until there are NO errors reported.
5. Run the T4 Tax Eligible Reconciliation. This process is making sure that the value you print in Box 14 matches the actual earnings/deduction that you've identified on your income tax deduction code (YTD Adjustments made throughout the year, or the setup of earnings/deduction include/exclude list, are common problems when executing this reconciliation). For example, in Figure 7 below, the system is 'E' excluding NO pay codes and is 'I' including only deduction codes 20 and 30. Therefore, when the tax eligible reconciliation process is executed, the system considers all pay codes plus the employer paid amounts from deduction codes 20 and 30, as eligible, or as part of this reconciliation.
Figure 7. (Deduction Code Database)
The intent of this process is to give you confidence that you have picked up all taxable information correctly. It checks your data looking for pay periods where the same earnings will be reported under both tax numbers when the T4 Statement Processing is run, thus inflating your reported earnings. It also identifies pay periods where earnings exist without an income tax code. These earnings will be ignored when the T4 Statement Processing is run.
Review the report, adjust your data as needed using the Year To Date Adjustments if still in the current tax year for which you are processing T4s for, otherwise, use Statement History Adjustments if making adjustment into the previous year (Ex. It is February, and you are making an adjustment for December of the previous year). You MUST rerun this process until there are NO errors reported, or, if you cannot fix the errors, you are able to justify the errors to CRA.
Figure 8. (T4 Tax Eligible Reconciliation Report Example)
To Fix: Enter a YTD Adjustment or Statement History Adjustment for the affected period Figure 9.). In the Deduction Screen add your Income Tax Code with a zero TAKEN amount but enter the pay period Eligible Earnings for tax purposes. This will NOT trigger a Journal Entry into Finance.
Figure 9. (YTD Adjustment Example)
6. Balance T4's: (Quarterly/Yearly)
This procedure ensures that you are reporting the correct information on your T4s by manually comparing the totals from the payroll history files to those generated by the T4 Processing, as defined in the T4 Tax Forms Format Profile.
i. Print the T4 Format Profile report (this tells you "what" is being printed "where"). (Refer to Figure 5 for an example of what the T4 Profile looks like)
ii. Run the YTD Payroll Register (1,2,22) for the entire year and select the SUMMARY option (this provides you with what "actually" happened in the software for the period defined). The option to export the file as a CSV file using the Excel icon is available.
iii. Run the T4 Summary and Total Reporting (3,4,6,4) and select the TOTALS and YTD History option (this tells you what will print on the T4s based on the setup of the T4 Profile. Therefore, if there is a difference between the YTD Payroll Register & the T4 Summary and Total, you will use the T4 Format Profile to help you identify "why" and make necessary changes). Remember, if you have more than one payroll account number on a payroll, you must run this separately for each group. The option to export the file as a CSV file using the Excel icon is available.
Figure 10. (T4 Summary and Total Reporting example)
Figure 11.
NOTE: CRA will not allow reporting of negative values in any boxes on the T4. A "Summary Of Negative Box Values Bypassed" is included on the bottom of the following reports (3,4,6,2 and 3,4,6,4 and 3,4,6,6).
iv. Balance the T4's starting with Box 14 on the Totals Report. Using the T4 Format Profile (step i) as a guide, identify all the pay codes and deduction codes that make up the value in Box 14. Using the YTD Payroll Register (step ii), total the value of each of these pay or deduction codes. This value should be the same as that printed on the Totals Report (step iii).
Example:
T4 Format Profile Box 46 Charitable Donations = D50,51
YTD Payroll Register D50 United Way = $125,940
D51 Christmas Fund = $23,760
Totals Report Box 46 $149,700 (deduct any negative values for Box listed at report bottom)
Balancing: D50 + D51 = Total
$125,940 + 23,760 = $ 149,700 √ Balanced!
HINT: If you have two income tax codes active in one period, Union Dues and Charitable Deductions will be reported on the tax group with the highest tax eligible earnings.
HINT: BOX 24 (EI Insurable Earnings) & BOX 26 (CPP Pensionable Earnings) may not balance between your reports because the keyword MAX immediately followed by the maximum insurable/pensionable earnings for the applicable tax year, has been entered in the T4 Format Profile. For example, MAX48600 on BOX 24 and MAX52500 on BOX 26. The addition of this keyword will cause the T4 create process to cap the BOX 24 and BOX 26 earnings based on the MAX amount defined. These two boxes are always to be reported on the T4 but only up to the applicable yearly limit, and to be reported as zero when no earnings are applicable.
This keyword causes a value to print in the respective box on the T4 only up to the maximum eligible earnings for CPP or EI, as required on the T4. However, the YTD Payroll Register will record ALL the earnings eligible for CPP.
OPTION: For balancing purposes ONLY, alternate profiles could be setup and used that do not contain the keyword "MAX". See T4 presentation for example, or contact atrievePayroll support.