The deadline to file the 2021 T4s is Feb. 28, 2022, and it's very likely many business owners will wait until the last minute to finish them.
Also, some businesses have trouble completing them on time because they're missing information. For example, restaurants often don't get an employee's information in advance and must chase them for their social insurance number or date of birth when it's time to issue T4s.
Not filing your T4 slips on time can be costly. The maximum penalty varies depending on the number of employees you have. It can be as low as $5 or as high as $7,500. See the chart below for more details:
| Number of slips filed late | Penalty per day (up to 100 days) | Maximum penalty |
|---|---|---|
| 1 to 5 | penalty not based on number of days | $100 flat penalty |
| 6 to 10 | $5 | $500 |
| 11 to 50 | $10 | $1,000 |
| 51 to 500 | $15 | $1,500 |
| 501 to 2,500 | $25 | $2,500 |
| 2,501 to 10,000 | $50 | $5,000 |
| 10,001 or more | $75 | $7,500 |
Source: Canada Revenue Agency
Due to a high employee turnover rate, for example, companies in the service industry, may have up to 50 employees over the course of a year and could face a maximum penalty of $1,000.
There are a number of other fines and penalties, too:
- Mandatory electronic filing—If you file more than 50 returns on paper, you could be subject to a penalty of $250 to $2,500.
- Penalty for failure to deduct—You will pay a penalty of 10% of the amount of income tax, CPP, and EI that wasn't deducted. For subsequent failures in the same year, the penalty rises to 20%.
- Penalty for failure to remit and remitting late—If you deduct the amounts and send them in late or don't remit them to the Receiver General, the penalty can be as low as 3% or as high as 10%.
- Interest—The Canada Revenue Agency (CRA) may also charge interest if you fail to pay an amount.
Also, T4s can be a little more complicated for restaurants and franchisees than they are for an average small business because not all benefits are taxable.
Understanding what the taxable benefits are and how they should be allocated on T4s can be a challenge in many instances:
- Uniforms—If you provide employees with uniforms or reimburse them to buy uniforms and require a receipt, it's not a taxable benefit. If you don't require a receipt, then it's a taxable benefit.
- Cell phones—Providing employees with cell phones you own or reimbursing the cost of their cell phone plan isn't a taxable benefit. However, it's a taxable benefit if you reimburse employees for the cost of their own phones or part of the use is personal.
- Tips—Controlled tips must be recorded on a T4 because these tips are controlled and distributed by the employer. Direct tips aren't controlled by the employer, so employees are responsible for reporting this as income.
Making T4 season easier
Scrambling to complete your T4s before the deadline can be both time consuming and costly. You should make sure all the information required for T4s is ready before an employee is hired and double checked before you begin preparing T4s. When employees leave, make sure they provide you with their mailing addresses as part of your offboarding process.
The sooner you get your T4s complete, the happier your employees will be. It also gives you or your payroll team more time to collect any information you can't find. This preparation helps eases the process and may reduce any late filings.
Distribute pay with confidence
Unlike some payroll providers, we don't charge to complete and distribute your T4s. We help hundreds of clients and individuals transition their company payrolls. Contact one of of our Corporate Payroll Services professionals to find out how we can solve your payroll needs.