Entrepreneurship & Small Business

CRA Payroll Remittance - Over Remitted

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  • Jan 15th, 2019 5:52 pm
[OP]
Deal Addict
Sep 23, 2007
4445 posts
791 upvotes

CRA Payroll Remittance - Over Remitted

Without boring you with the details...I reconciled what my remittances should have been and what I actually remitted for payroll taxes. I guess me or the person I hired screwed up somewhere. It's about 10% over remitted.

In the online My Business Account there is a section for Request A Refund. Has anyone gone through this procedure? How hard is it? I did the reconciliation file for the whole year but can't pinpoint where exactly it went wrong. I just know EI number is good. The entire difference is related to CPP it seems. Anyone with experience want to share? I mean if I can walk through CRA rep myself, that would save me some money in professional fees. This is a kind of thing I can explain myself.
8 replies
Deal Fanatic
Aug 21, 2007
5038 posts
272 upvotes
Markham
do you happen to be on payroll yourself?

if so, you could add the over remittance amount to the amount that you show as tax deducted for your own personal T4...and then you'll essentially get it back at tax time in march/april.

Achieves the same thing (more or less) without raising any red flags.
[OP]
Deal Addict
Sep 23, 2007
4445 posts
791 upvotes
Thanks Adeel. Yes I'm on payroll as well.

Basically most employees were over deducted on CPP, and hence the employer portion of CPP is also over-remitted. Let's make it simple with some fictitious numbers. After doing a reconciliation, the actual CPP employee side should have been $4000. But actual deducted from employees was $5000. So employer portion also overpaid by $1000. Total overpaid by employees and employers = $2000 ($1000 + $1000). We issued pay stubs already throughout the year.

Questions
-So on the T4s, I need to show $5000 or $4000 for total CPP deducted? I don't think any of the employees are tax experts and would add up each pay stub to see if it matches with T4. But I want to do the right thing for them. If they over-deducted then they can claim back the excess CPP right?

-If I go with your idea, what's the calculation? I add to myself a gross amount such that I would have $1000 more in deductions of CPP/EI/Income Taxes? I don't pay myself a lot from this corporation. So it'd be kind of weird if I show like $1.5k in gross salaries and deducted 1k.

-I have paid January to November remittances on time. 15th is the deadline for my December amount. What amount should I remit for December if any?
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Feb 14, 2009
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BananaHunter wrote:
Jan 14th, 2019 8:00 pm
Thanks Adeel. Yes I'm on payroll as well.

Basically most employees were over deducted on CPP, and hence the employer portion of CPP is also over-remitted. Let's make it simple with some fictitious numbers. After doing a reconciliation, the actual CPP employee side should have been $4000. But actual deducted from employees was $5000. So employer portion also overpaid by $1000. Total overpaid by employees and employers = $2000 ($1000 + $1000). We issued pay stubs already throughout the year.

Questions
-So on the T4s, I need to show $5000 or $4000 for total CPP deducted? I don't think any of the employees are tax experts and would add up each pay stub to see if it matches with T4. But I want to do the right thing for them. If they over-deducted then they can claim back the excess CPP right?

-If I go with your idea, what's the calculation? I add to myself a gross amount such that I would have $1000 more in deductions of CPP/EI/Income Taxes? I don't pay myself a lot from this corporation. So it'd be kind of weird if I show like $1.5k in gross salaries and deducted 1k.

-I have paid January to November remittances on time. 15th is the deadline for my December amount. What amount should I remit for December if any?
Any over-or-uinder-emmiting of corporate part is easy to sort-out later.
Govewrment will recalculate corporate part and will issue refund or
invoice with small interest.

Exact final calculation you (company) does for T4s and for T4-summary
Monthly payroll payments are, in fact, approximate prepayments -- installments

Over-emitting employee part -- defacto, company send some extra money ( that belong to employee) to government.
If you (company) properly report this wrongly inflated amount in T4,
and employee report this inflated amount in his tax return, then
government will return this money to employee.

Simplified example.
After exact calculations in the end of the year, the company has to emmit to goverment:
1000$ CPP as company part and 2000$ CPP as employee part.
In fact company sent (overpaid, over-emitted) 1200$ as company part and 2500 as employee part.

in T4 and T4Summary you (company) do report
(1.1) 1000$ calculated corporate CPP and 1200$ as paid installments
(1.2) 2500$ calculated CPP employee part. do not do correct calculation here and report 2500 as installments.
Total from government assessment will be 200$ refund -- over-payments for corporate part.

in T4 report 2500 CPP contribution.
Employee will report it in his/her personal tax report and will receive 500$ refund.

------------------ ================== --------------------
Alternatively , you (company) can issue 500$ CPP refund to an employee
and then report line (1.2) as
2000 calculated CPP employee part and 2500$ installments
Then government will issue additional 500$ refund on top of 200$ for corporate part.

I suggest you call CRA immediately and discuss the issue directly.

Cheers!
Deal Fanatic
Aug 21, 2007
5038 posts
272 upvotes
Markham
anything you deduct from the employee has to go back to them, otherwise you are running a foul of law...so what should be done is:

any extra CPP deducted on the employee side (ie withheld) should be added to the tax deducted reported for the employee (that way employee is still whole)

the overpayment on the matching portion side can be added to your tax deducted.

Now whether you want to have a T4 with 1500 and tax of 1000 is up to you, but personall I dont see issues with it as random stuff like this happens from time to time and I doub will raise any flags

Since this is the last remittance for year, what I would do is:

Compare what actual/correct CPP should be x 2, plus actual correct EI x 2.4 (this is to get figures that include both employee and employer portion) plus tax withheld (remember to allocate the excess CPP to your tax number) - compare that to what you have sent in already - the difference is the amount to remit now

*sorry this is hard to explain in text without making a long winded post
[OP]
Deal Addict
Sep 23, 2007
4445 posts
791 upvotes
It's actually very clear to me. Thanks Adeel. It helps that I have an accounting background, though I never specialized in payroll. Learning as I go.
Deal Fanatic
Aug 21, 2007
5038 posts
272 upvotes
Markham
BananaHunter wrote:
Jan 15th, 2019 11:28 am
It's actually very clear to me. Thanks Adeel. It helps that I have an accounting background, though I never specialized in payroll. Learning as I go.
in that case glad to have helped
Penalty Box
User avatar
Jun 24, 2015
1872 posts
343 upvotes
Woodbridge, ON
Notice: I was in the same boat as you, one of the people who was in charge made a calculation error and we over-remitted to the CRA. Now here is the good news, you can easily fix it. As long as you took the correct deductions off your employees cheques you will have an accounting error, you simply file your T4 at the end of the year, you will have a remaining balance left, you can either transfer the balance from 2018 to the 2019 program year, or ask for it to be re-funded. They will want to see where you made the mistake so they may ask for a Pier overview, sometimes they don't but its pretty simple, but ya for the first time remitter, you feel nervous when you make a mistake but don't sweat it, it will be fine.
Hi
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Feb 14, 2009
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adeel wrote:
Jan 15th, 2019 10:53 am
anything you deduct from the employee has to go back to them, otherwise you are running a foul of law...so what should be done is:

any extra CPP deducted on the employee side (ie withheld) should be added to the tax deducted reported for the employee (that way employee is still whole)

the overpayment on the matching portion side can be added to your tax deducted.

Now whether you want to have a T4 with 1500 and tax of 1000 is up to you, but personall I dont see issues with it as random stuff like this happens from time to time and I doub will raise any flags

Since this is the last remittance for year, what I would do is:

Compare what actual/correct CPP should be x 2, plus actual correct EI x 2.4 (this is to get figures that include both employee and employer portion) plus tax withheld (remember to allocate the excess CPP to your tax number) - compare that to what you have sent in already - the difference is the amount to remit now

*sorry this is hard to explain in text without making a long winded post
Well, mathematically and, probably legally your solution is fine.

But employee still has paper-trail and slips saying it was
X for CPP deduction and Y for income tax deduction.

Now in T4 you suggested -- Z been CPP over-payment amount --
to put X-Z for CPP and X+Z for income tax deduction.

I guess , in this case, a letter with explanations is required from employer to employee.

Cheers!

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