Transcript

Host: Welcome to the segment called Correcting payroll calculation errors part of the Payroll Information for a New Small Business video.

I'm your host Janice Novak.

With me is Andrea Cohen who will share with us, in this segment, information that she has obtained from the CRA about Correcting payroll calculation errors.

Host: Welcome Andrea. Tell me, what if an employer makes a mistake deducting amounts from an employee's pay?

Subject matter expert: Thank you Janice. The CRA knows that mistakes happen.

However, it's important that errors are corrected as soon as possible.

Generally, if the error is found before the calendar year-end,

• the employer can remit any shortage as soon as possible using My Payment or a remittance form.
• the employer can recover the employee's share of the shortage from the employee's future pay if not enough was deducted.
• if the employer over-remitted, the next remittance can be reduced by the amount of the overpayment.
• the employer can also reimburse the employee their share of the amounts deducted in error.

The T4 for the employee will reflect the corrected amount.

In some cases, you as the employer could have found the error. In other cases, the CRA could have sent you a notice of assessment.

Host: Are there consequences for under-deducting CPP or EI?

Subject matter expert: Yes. Penalties and interest may apply to insufficient remittances as well as late payments.

See the segment of the video on Employer penalties for more information.

Host: What happens if I don't notice the error and I filed the slips and return?

Subject matter expert: After the CRA receives your information return, they do a pensionable and insurable earnings review, called a PIER, to verify you have deducted the right amount of CPP and EI.

For more information on what happens when there is a discrepancy, go to the CRA's Pensionable and Insurable Earnings Review (PIER) webpage. The link is included in the Related links for this segment.

Host: In this case, the T4 was already issued to the employee? Do I amend the T4?

Subject matter expert: No. Once the employer replies to the PIER printout, the CRA will amend the T4 slips that contain deficiencies that the employer agrees with and pays. The CRA will send copies of the amended T4 slips to the employer to distribute.

Host: I understand the employer has to pay any deficiencies, but can they collect them from the employee?

Subject matter expert: If the employee is still working for the employer, the employer can recover the employee's portion from subsequent payments they make to that individual.

Host: Are there any other limits to collecting the deficiencies from an employee?

Subject matter expert: Yes, a contribution amount cannot be recovered from the employee if it has been outstanding for more than 12 months.

Host: So let's say I get a notice of assessment today because I forgot to take CPP off an employee's pay. Can you take me through what I'd have to do?

Subject matter expert: Certainly. First, you'd want to make sure you pay the whole amount, including the penalty, as soon as possible, to avoid more interest.

The employer cannot recover a contribution or premium that has been outstanding for more than 12 months. Note that the 12 months starts from the time the CPP or EI should have been deducted and not from the time the employer was assessed.

The CRA in this situation will send a notice of assessment and amend the T4 for you.

Host: Ok, now what about the second situation, where too much CPP or EI has been deducted?

Subject matter expert: If you find you have taken too much for CPP or EI, you should reimburse the employee the amount deducted in error and adjust your payroll records to reflect the change.

This will result in a credit on your CRA payroll account equal to the employee and employer part of the excess.

You can then reduce a future remittance in the same calendar year.

Do not include the reimbursed amount on the T4 slip.

Host: And what if you can't reimburse the employee; for example if you've lost contact with a former employee?

Subject matter expert: If you can't reimburse the overpayment, show the total CPP or EI deducted and the correct pensionable or insurable earnings on the employee's T4 slip.

Host: Will the employer automatically get back their portion of CPP or EI deductions if they overpaid?

Subject matter expert: No, If an employer reported the employee's overpayments on a T4 slip, they can ask for a refund by completing Form PD24, Application for a Refund of Overdeducted CPP Contributions or EI Premiums.

The employer's request must be made no later than four years from the end of the year in which the overpayment occurred for CPP and no later than three years from the end of the year in which the overpayment occurred for EI.

More information is also available in the following publication:

Form PD24, Application for a Refund of Overdeducted CPP Contributions or EI Premiums.

Host: For more information on this topic, what's a good resource?

Subject matter expert: For more information on correcting payroll issues, go to the CRA webpage on How to correct payroll remitting errors. The link is included in the Related links for this segment.

More information is also available in the following publication;

T4001, Employer's Guide – Payroll Deductions and Remittances, Chapters 2 and 3.

Host: Thank you Andrea.

This concludes the segment on Correcting payroll calculation errors, part of the CRA's Payroll Information for a New Small Business video.

Thank you for watching.