A T4 slip is generally filled out by an employer who pays employment income, commissions, taxable allowances and benefits for an employee. According to some chartered accountants, employees must check for mistakes on the T4 instead of focusing the attention on the tax hit and contributions made to the Canada Pension Plan and employment insurance.
It is common for employees to check their T4’s only when they receive notice from Canada Revenue Agency (CRA). Businesses can make mistakes when filling up T4’s because sometimes the employer does not understand the benefits that are taxable to the employees. In other cases, the employer simply forgets to include the benefits.
According to Gabriella Loren, mistakes are rather common even for employers that use a payroll system. It is highly important for employees to be aware that the employer must include a T4 slip on what they pay to cover employee life, accidental death and dismemberment and critical illness insurance. For example, if the employee’s earnings amount to $100,000 a year plus $300 for insurance benefits, the total taxable income is $130,000.
Cash benefits that employees receive for health and wellness activities like gym membership or a personal trainer are considered taxable benefits. Some employers do not fully understand that perks require a T4 slip so that the employee will not face a problem with CRA.
The commissions that an employee earns on top of their earnings should always be recognized on the T4 slip. If the employer does not want to recognize the commission in the T4 slip, it could limit the amount that employees can deduct for out-of-pocket expenses like travel expenses or meal allowances. However, employers must fill out T2200 to declare conditions of employment and whether the employee has to spend his own money when performing work. Employees should not be afraid to ask questions on the benefits they receive to avoid potential tax implications.
Why should accountants recommend chartered accountant insurance to their clients? Because it is the protection for the client and the accountant against the substantial professional fees that may be incurred during the audit activity. Insurance ensures that both the client and accountant will not suffer from serious financial losses.