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Tax Alert

New T4 reporting requirements for employers

Employers completing T4 slips and summaries for 2020 should be aware of new reporting requirements related to the completion of these tax documents. All Canadian employers who issue T4s to employees must report certain employment payments related to Covid-19, regardless of whether they have applied for Covid-19 related government programs or not. This additional information is intended to validate payments made to individuals under the Canada Emergency Response Benefit, Canada Emergency Student Benefit and payments made to employers under the Canada Emergency Wage Subsidy (CEWS).

New T4 information codes

For the tax year 2020, in addition to reporting employment income in Box 14 or Code 71, the below information codes are to be used when reporting employment income and retroactive payments in the following periods:

  • Box 57: Employment income – March 15 to May 9
  • Box 58: Employment income – May 10 to July 4
  • Box 59: Employment income – July 5 to August 29
  • Box 60: Employment income – August 30 to September 26

Each period above pertains to the day employees were paid, not the period of work the payment covered. Example: If you are reporting employment income for the period of April 25 to May 8, payable on May 14, use code 58.

Temporary Wage Subsidy PD27 form and T4 Summaries

Prior to the introduction of the CEWS, the federal government had introduced the Temporary Wage Subsidy (TWS) which provided employers a subsidy of up to 10% of employee remuneration paid, up to certain limits. Employers would access the TWS by reducing their payroll remittances by the amount of the subsidy calculated. Many employers took advantage of the program, either because they did not qualify for the CEWS or because they had already started their payroll remittances prior to the introduction of the CEWS.

Those employers who did claim the TWS are required to complete Form PD27, the 10% Temporary Wage Subsidy Self-identification Form for Employers. This form will be used by the CRA to verify whether an employer who qualified for both the CEWS and the TWS elected to claim a TWS of 10% or less (or none at all). Furthermore, the CRA will use the form to reconcile the amount of payroll remittances during the relevant pay periods that fall within the TWS entitlement period (i.e. March 18 to June 19, 2020) to the amounts reported on the 2020 T4 Summary reconciliations. It will be important for employers to obtain the exact TWS amounts claimed for each payment date to ensure the T4 summary totals agree with what was actually paid to CRA.

One issue with the PD27 form is that it requires employers to report amounts based on pay period dates whereas the TWS, itself, is based on payment dates. Given that the program and the form are both new, this has caused some confusion for employers, who have little familiarity with these rules.

Other considerations related to the T4 and PD27

  • Eligible for additional subsidy: Some employers may not have claimed the full amount of the TWS that they were eligible for. This may result in a refund showing on the T4 Summary. If this is the case, employers should be aware that they can still access the remaining amount of the TWS that they are entitled to.
  • Due date: There is currently no due date for the PD27 form; however, everyone is encouraged to complete this form before the end of the year to avoid receiving a discrepancy notice from the CRA.
  • No TWS claim: Employers who elected to receive 0% of the TWS must still submit the PD27 form.
  • Detailed information required: To properly complete the forms, employers will need detailed payroll information including pay period dates, payment dates, income types and amounts paid as well as source deductions types and amounts.