Payroll year-end! Is it that time already?
As the last few weeks of 2016 creep up, many of you will think of or start your payroll year-end processes. Are you feeling stressed? Not to worry. The purpose of this blog is to assist you so that your payroll year-end processing would proceed seamlessly and stress-free. Without further ado, here are some steps to consider while you are processing year-end payroll in Sage 300 Payroll.
Payroll Year-End & New Year Checklist
We recommend that you create and use Payroll Year-End & New Year Checklist. Remember the words to that immortal song “Making a List and checking it Twice …” Don’t be naughty – use a checklist!
Why should you work with a checklist? The payroll-year-end process only occurs once a year and the probability of omitting part of the process or making an error is higher than if this was a monthly or daily process. Following a list will help to avoid or limit errors. Also, if you create a checklist this year, the list will serve as a foundation for review and improvement for the next year.
I can provide you with a basic yet comprehensive checklist to give you a solid start. However, for any checklist to be useful it should be customized to reflect the way your business operates. You may want to include additional tips unique to your own circumstances.
Set up a storage system for critical information
Create a payroll year-end reference file or folder, either physical, electronic or a combination of both to document your business’s payroll filing procedures and to store relevant documents. The big advantage of doing this is that you will have quick access to information when required.
You should include forms and guides required or used for payroll-year-end. For example, locate forms and guides from the CRA website or as required, order hard copies for year-end filing.
- Employers’ Guide – Payroll Deductions and Remittances (T4001)
- Employers’ Guide – Filing the T4 Slip and Summary Form (RC4120)
- Deducting Income Tax on Pension and other Income, and Filing the T4A Slip and summary Form (RC4157)
- Employers’ Guide – Taxable Benefits (T4130)
Get the latest tax updates for Sage 300
Sage will announce the tables as soon as they are available and we’ll gladly help you install them on your system. You can install the tax update for Sage 300 even if you still have December payrolls to process. Sage 300 Payroll uses the processing dates to select the correct tax calculations. You must install and activate the tax update before you make any January payroll entries. Note – you need the latest tax updates in order to produce government reports and process payroll correctly.
How to check if you have the latest tax update activated in Sage 300?
- Go to Help > System Information.
- Look for a red check mark next to your Canadian Payroll program and the Cdn PR Tax Update (with the appropriate date).
Conduct a pre-year-end payroll review
I highly recommend you start reviewing, collecting and processing necessary payroll information BEFORE the final pay at year-end. If you notice any errors you will still have time to make changes or adjustments. Here are some common issues to consider in your review:
Do you have to pay bonuses this year? You can process the bonus by entering a timecard under Payroll Transactions >Payroll Timecards >Timecards for each appropriate employee. It is not uncommon for recipients of bonuses to question the amount tax taken off the bonus cheque so you may want to be prepared for the onslaught. The following link is useful in explaining tax calculated on bonuses: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/clcltng/spcl/bnns-eng.html
Is there any unused vacation that needs to be paid out? Find each employee’s current balance by going to Payroll Transaction Reports and printing the Accruals report.
Adjustments (accruals, earnings, taxes)
Are there any employees that need their year-end totals adjusted for any accruals, earnings or taxes?
- Update employee records for manual or canceled cheques.
You should adjust your employee year-to-date balances promptly when you issue manual cheques, or when direct deposits are reversed or returned by a financial institution.
- Make adjustments to final pay cheques and remittances.
Before issuing remittances and final pay cheques, you may be required to make important adjustments. Your primary focus will be determining whether certain pay items are considered taxable benefits and making sure the appropriate taxes are deducted. Also, to ensure the correct and CPP and EI calculations are applied.
Review employee information and deductions
Check the accuracy of employee data in Sage 300
Have a look at the employee setup (Social Insurance #’s, Date of Birth, Addresses, etc.). Some find it is easier to export a report to Excel so it’s easier to review.
Validate Social Insurance Numbers (SINs)
By law, employers must obtain a valid Social Insurance Number (SIN) from each employee. And the employee is obligated to provide their SIN number to their employer. As an employer, you must be able to show that a reasonable effort was made to obtain the number. Sage 300 – Canadian Payroll performs a validity check on the Social Insurance Numbers of new employees as they are added to the system. However, I still recommend that you run the duplicate SIN number report.
Check CPP/QPP and EI deductions
Double-check CPP, EI calculations to avoid an unfavorable Pensionable and Insurance Earnings Review (PIER) by using the CRA approved checklist.
Print New CPP/QPP and EI Balancing Report
A new report is now available on the T4s report window (Payroll Government Reports > T4s) to help you balance. The CPP/QPP and EI Balancing report lists only employees that are out of balance and includes the employees’ gross pay, pensionable earnings, CPP/QPP deductions and calculations, and EI earnings and deductions. So if there is nothing to report you should be happy.
When generating the report you may be required to review and update your employees’ T4 data. It’s important that you correct invalid employee data posted in validation messages (for example, negative amounts for tax contributions) to ensure balancing issues are clearly identified.
Back up, back up, back up!!!
After the final pay cheque run, back up your data! Your first priority on your year-end payroll checklist is to back-up your database. It takes only a few seconds and can save you hours or days in case you encounter problems. Did I mention backup?
Do a Test Run of T4’s
Print and review your T4 and/or T4A’s. If you realize you need to make some adjustments then you may find the following documents from Sage Knowledgebase useful:
How to adjust and correct T4 box totals (ID 18510)
This document provides information on how to use Transaction History to adjust the amounts in the employee’s T4 boxes. All the adjustments will be reflected on government or non-government reports.
How to adjust an accrual’s remaining balance (ID 49167)
This document shares information on how to use Transaction History to adjust an Accrual.
How to adjust an employee earnings total (ID 49175)
This document provides information on how to use Transaction History to adjust an employee’s earning.
Prepare your Payroll system for the New Year
- Have employees fill out the TD1 forms if required
Before beginning your 2017 payroll, I recommend that you update your employee records to reflect the new federal personal tax credit amounts. You can use the Update TD1 Claim function to automatically adjust the federal tax credit amounts on the employee’s record or you can do it manually for each employee.
- Check the number of pay periods for the New Year
Determine when the first and last payrolls are for the upcoming year and how many pays you will have that year. If necessary, adjust in the Payroll Options > Frequency window.
If you are on a weekly or biweekly pay cycle and will be having 27 (biweekly) or 53 (weekly) pays in 2017, change the frequency in the Payroll Options window. This helps ensure the appropriate tax and CPP deductions will take place. Don’t forget to advise your employees of any change.
Print T4’s and Year-end reports
The last step is to print T4/T4A Forms for each employee, employers and print a summary for the CRA.
You can print the following reports to confirm that the information submitted matches the T4/T4A’s forms and is also accurate.
- Accruals, Earnings and Hours, Earnings /Deduction Summary, Tax Calculation Analysis, Worker’s Compensation
Print the T4s and other slips:
- T4s, T4As and Releve1, T5018 (CPRS) for subcontractors (printed from A/P)
I recommend rum and eggnog but each to his/her own!