Entrepreneurship & Small Business

Payroll Deductions Error

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Deal Addict
May 9, 2003
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Payroll Deductions Error

I'm assisting a friend in creating T4's for the 2012 calendar year. Over the course of the year, there was an administrative error that led to a -$138.99 short in payroll remittance.

Unfortunately, December 2012 has already been remitted so this cannot be fixed by "topping up" the last remittance by $138.99.

I have not encountered this before and would appreciate any assistance.

Thank you.
21 replies
Deal Addict
May 26, 2011
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I've made multiple remittances in a month for just this purpose. They were always allocated to the previous month. You can check My Business Account 48 hours after the remittance to be sure. If it's incorrect, it's a very easy fix by calling CRA.
Deal Addict
May 26, 2011
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I have a couple of tips that may not apply to you, but might be helpful if any other bookkeeper stumbles across this thread:

If you calculate payroll deductions manually, you may want to use PDOC's "Verify CPP Contributions and EI Premiums" feature to verify you've deducted the correct amount. I accidentally screwed up once and it was a pain to fix, so now I always double check before I make T4s as a matter of course.

Also, if you use an old version of Simply Accounting and calculate payroll manually, your EI Insurable Earnings might be wrong, even if you've entered the correct data. Tip: if it's higher than gross earnings, it's wrong.

https://apps.cra-arc.gc.ca/ebci/rhpd/st ... ng=English
Deal Fanatic
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Mar 20, 2009
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Make very sure that any additional amount you remit is allocated to your calendar year 2012 payroll tax account. The CRA's default will be to put it against your 2013 account, which will not fix your 2012 shortfall. This can cause all kinds of problems since their speed at fixing things like that is glacial and they charge interest on the outstanding error.
Deal Addict
May 26, 2011
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...and now you have two entirely opposite answers. :)
Deal Fanatic
Aug 21, 2007
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bizzyseller wrote: I'm assisting a friend in creating T4's for the 2012 calendar year. Over the course of the year, there was an administrative error that led to a -$138.99 short in payroll remittance.

Unfortunately, December 2012 has already been remitted so this cannot be fixed by "topping up" the last remittance by $138.99.

I have not encountered this before and would appreciate any assistance.

Thank you.
Send in the top up payment tomorrow (before the 15th) and make sure its allocated to Dec 2012. You can make more than one payment for a given month if needed with no issues.

Do not wait to pay shortfall in Feb or when filing T4 summary, as you will likely be hit with penalties and interest.
Deal Addict
Feb 5, 2009
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If the shareholder is on the payroll reduce the amount of tax on his/her t4 by the amount of the shorfall, and have balance owing of zero.
Deal Addict
May 9, 2003
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Great suggestions. It never crossed my mind to make another Dec 2012 remittance.

If the administrative error occurred in April 2012, would I top up the shortfall for Dec 2012, or April 2012?
Deal Addict
May 26, 2011
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As far as I am aware, as long as the total matches at the end of the year, you'll be fine. In other words it should be fine to allocate the remittance to December 2012. (But not January 2013.)
Deal Addict
Feb 5, 2009
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bizzyseller wrote: Great suggestions. It never crossed my mind to make another Dec 2012 remittance.

If the administrative error occurred in April 2012, would I top up the shortfall for Dec 2012, or April 2012?
No, definetely not April, you will pay late penalties.
I would advise against doing top up of December either unless you haven't send in the remittance yet for the month, if you did this is what will likely happen, no matter what CRA will allocate it to January 2013, they will charge you penalties, you will then have to call them to change it to December, much easier to to adjustments to shareholder t4 if that is an option.
Deal Addict
May 9, 2003
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I ended up using Homerhomer's suggestion by reducing the Shareholder's remitted tax amount by 138.99; everything balances!

I appreciate the quick and helpful responses!
Deal Addict
Jan 1, 2009
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bizzyseller wrote: I ended up using Homerhomer's suggestion by reducing the Shareholder's remitted tax amount by 138.99; everything balances!
I am sorry, you technically cannot reduce the shareholder's tax amount to cover the outstanding remittance. In this case, the CRA is jilted by not receiving an additional $138.99 in remittance, and the shareholder will have to pay a bit more income tax since income tax deducted off his or her T4 was less by $138.99. Your alternatives are to pay the additional $138.99 shortfall immediately using myBA and coding it to the December 2012 remittance (PD7a), or continue on by not paying the shortfall and hope there is no random trust exam on your payroll account for 2012.
Deal Addict
May 26, 2011
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Pardon my density but I'm not clear on why that's wrong. (For this example, assume this is my problem.) Let's say I under-deducted $69.49 CPP. To fix the problem, I adjust my paycheque so I've deducted the correct amount of CPP and instead under-deduct $138.98 income tax. ($69.49 Employee's CPP portion + $69.49 Employer's CPP portion.)

When I file my personal income taxes, I'll receive a refund that is $138.98 less than it would have been. Hasn't the CRA received everything owed to them?
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Aug 21, 2007
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Homerhomer wrote: No, definetely not April, you will pay late penalties.
I would advise against doing top up of December either unless you haven't send in the remittance yet for the month, if you did this is what will likely happen, no matter what CRA will allocate it to January 2013, they will charge you penalties, you will then have to call them to change it to December, much easier to to adjustments to shareholder t4 if that is an option.
bizzyseller wrote: I ended up using Homerhomer's suggestion by reducing the Shareholder's remitted tax amount by 138.99; everything balances!

I appreciate the quick and helpful responses!

If you pay online, as long as you allocate to December, they will not reallocate it to another month...have done this before.

Shareholder adjustment was a good idea though.
Cypherus21 wrote: I am sorry, you technically cannot reduce the shareholder's tax amount to cover the outstanding remittance. In this case, the CRA is jilted by not receiving an additional $138.99 in remittance, and the shareholder will have to pay a bit more income tax since income tax deducted off his or her T4 was less by $138.99. Your alternatives are to pay the additional $138.99 shortfall immediately using myBA and coding it to the December 2012 remittance (PD7a), or continue on by not paying the shortfall and hope there is no random trust exam on your payroll account for 2012.
PianoGuy wrote: Pardon my density but I'm not clear on why that's wrong. (For this example, assume this is my problem.) Let's say I under-deducted $69.49 CPP. To fix the problem, I adjust my paycheque so I've deducted the correct amount of CPP and instead under-deduct $138.98 income tax. ($69.49 Employee's CPP portion + $69.49 Employer's CPP portion.)

When I file my personal income taxes, I'll receive a refund that is $138.98 less than it would have been. Hasn't the CRA received everything owed to them?
Yes, you have it right in practice.

Cypherus has it technically correct - assuming you deduct in taxes exactly what you should, by doing the adjustment you'd be giving $160 less to the gov't than they should be holding - but in administrative practice, slight underdeduction for tax is almost certainly not going to raise any bells - esp on the T4 for the business owner.
Deal Addict
Feb 5, 2009
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I have done it thousands of times in the last 15 years never causing any issues and avoiding many pier reviews in the process. At the end the government gets exactly the same amount of income tax and payroll taxes.
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PianoGuy wrote: When I file my personal income taxes, I'll receive a refund that is $138.98 less than it would have been. Hasn't the CRA received everything owed to them?
That's not the point. You're trying to use common sense that it would all balance out to the same amount in the end and avoid a lot of administrative overhead shuffling money around to no net effect. The CRA doesn't use common sense - they are a bureaucracy that lives for administrative overhead.

Simple example: We pay a director a fee for their services at the end of the year. The CRA decides that we have to collect and remit CPP on that amount, even though the director is not an employee of our company and has already paid maximum CPP in the regular employment. We send the CPP money to the CRA. The director files a tax return showing CPP overpayment. The CRA sends the money back to the director. The director pays it back to us. Four transfers, lots of overhead, no net effect. The CRA is happy.
Deal Addict
May 26, 2011
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Last time that happened to me our accountant had me check a box "CPP Exempt" which eliminated that.
Deal Addict
Feb 5, 2009
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JamesA1 wrote:
Simple example: We pay a director a fee for their services at the end of the year. The CRA decides that we have to collect and remit CPP on that amount, even though the director is not an employee of our company and has already paid maximum CPP in the regular employment. We send the CPP money to the CRA. The director files a tax return showing CPP overpayment. The CRA sends the money back to the director. The director pays it back to us. Four transfers, lots of overhead, no net effect. The CRA is happy.
Actually CRA is not happy and that's not done correctly the way you describe it.
There are more than one source of employment, the fact that the cpp is maximized from other source of employment is not relevant. If one person works for 5 companies in the year and makes $60k from each one of them, they all have to contribute to CPP and EI unless excempt, at the end of the year when filing personal tax return the employee gets a refund equal to CPP/EI contributed by 4 of the companies but that's only employee portion, employer portion never gets refunded and the employee should not have returned anything to the company.
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Mar 20, 2009
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Point taken on the CRA retaining the company CPP over-contribution. But as for why the individual (in this case not an employee, does not pay EI) should return the refunded over-contribution to the company, it's because they did not pay CPP initially. It was later paid separately by the company on their behalf when the CRA decided that CPP was owing.
Deal Fanatic
Aug 21, 2007
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JamesA1 wrote: That's not the point. You're trying to use common sense that it would all balance out to the same amount in the end and avoid a lot of administrative overhead shuffling money around to no net effect. The CRA doesn't use common sense - they are a bureaucracy that lives for administrative overhead.

Simple example: We pay a director a fee for their services at the end of the year. The CRA decides that we have to collect and remit CPP on that amount, even though the director is not an employee of our company and has already paid maximum CPP in the regular employment. We send the CPP money to the CRA. The director files a tax return showing CPP overpayment. The CRA sends the money back to the director. The director pays it back to us. Four transfers, lots of overhead, no net effect. The CRA is happy.
Homerhomer wrote: Actually CRA is not happy and that's not done correctly the way you describe it.
There are more than one source of employment, the fact that the cpp is maximized from other source of employment is not relevant. If one person works for 5 companies in the year and makes $60k from each one of them, they all have to contribute to CPP and EI unless excempt, at the end of the year when filing personal tax return the employee gets a refund equal to CPP/EI contributed by 4 of the companies but that's only employee portion, employer portion never gets refunded and the employee should not have returned anything to the company.
I just had this come up today for a client with multiple corps...was annoyed to find out that the extra corp cpp is lost to the CRA forever

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