T4 slips: 3 reasons to double-check your T4.
If you’re a salaried employee in Canada, you’ll get a T4 slip from your employer by the last day of February. The T4’s technical term is Statement of Remuneration Paid, which is a fancy way of saying “all the money you earned in a calendar year.”
Your T4 is among the most important official documents you’ll get this year because it establishes the baseline for what you’ll owe (or be refunded). With this in mind, the first two reasons to double-check your T4 slip for accuracy are (A) to pay only what you owe at the end of April, and (B) to not underpay and face paying the shortfall later, with interest.
Let’s look closer at two other reasons:
The third reason to double check your T4 slip is quite basic.
CRA gets your T4 information from a duplicate T4 slip your employer sends them. The reality is that anyone working in the HR or finance departments of a T4-issuing company could input a wrong number or flub the arithmetic, and CRA would have no reason to think the information is inaccurate.
If that happens on your T4, you should know before CRA established your baseline. And you can if you know how to double check your T4.
How to double check your T4.
The best way to double check your T4 is to compare it to your final pay stub of the calendar year in question. On that final pay stub, you’ll see the money you earned and your source deductions: the money that never made it into your account.
You’ll see those figures reflected on your T4 slip:
- Income tax deductions (T4 — Box 22): This indicates the tax contributions you made throughout the year.
- CPP contributions (T4 — Box 16): The Canada Pension Plan (CPP) is essentially a forced retirement savings program that everyone with a job pays into, and where contributions are matched by employers. It’s strongly recommended to pursue additional retirement savings plans alongside CPP.
- Employment insurance premiums (T4 — Box 18): EI contributions is the money that comes back to you when collecting EI because you’re between jobs, on parental leave, etc. These contributions are also split between employee and employer, though not equally.
Depending on your role and benefits, you may see other totals on your pay stub and T4 slip:
- Taxable benefits (T4 — Box 40): According to the CRA, a taxable benefit is when “the employee or officer receives an economic advantage that can be measured in money AND the individual is the primary beneficiary of the benefit.” This could be anything from a parking spot to a yearly vacation.
- Union dues (T4 — Box 44): Union dues are generally tax deductible when they meet CRA’s eligibility rules, so it’s important to make sure the amount reported here matches what appears on your year-end pay stub.
- Medical premiums (T4 — Box 85): Only the share of medical premiums you personally paid through payroll is eligible as a tax deduction, so make sure the figure on your T4 reflects just your portion, and not your employer’s.
- Registered Pension Plan (T4 — Box 20): Contributions to the registered pension plan offered by your employer are deducted from the gross total the CRA considers when calculating what you owe.
Conveniently, addressing and correcting an error on your T4 slip is very fixable. Slightly less convenient is that the change must be made by your employer. If you bring them your erroneous T4 and your pay stub, they should clear it right up for you.
How to double check that the CRA’s copy of your T4 is accurate.
If you want to be extra diligent and make sure the CRA’s version of your T4 matches yours, get a copy directly from them, either by phone or through your CRA MyAccount. If you don’t have an account, the peace of mind is well worth the five minutes it takes to set one up.
How long should you keep your T4 slips?
The Canadian government recommends you keep all tax records and supporting documents for a period of six years, and they strongly suggest those records be stored within Canada. In fact, you need permission from CRA to store your records out of the country.
What’s the difference between a T4 slip and T4A slip?
As mentioned above, if you’re an employee, you’ll get a T4 slip from your employer by the end of February. It will reflect the money you earned and the source deductions that were taken to cover your income tax as well as your CPP and EI contributions.
Your T4A reflects any money you earned elsewhere:
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- A side hustle/sole proprietorship
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- Pension payments
- Research grants, scholarships, medical travel assistance, and Registered Disability Savings Plan (RDSP) income
When the additional earnings were sent to you from a third party (i.e., a pension fund), they’ll send you a T4A like your employer does. If you earned the extra money through your own efforts (like a side hustle or sole proprietorship), it’s on you to prepare your own T4A.
Where to get your T4A slip.
CRA makes it easy to get all the forms you need for filing your taxes, and your T4A is no different. They even provide a step-by-step guide for filling out your T4A, including what you don’t have to report as income.
What about the other numbered T forms?
In and around tax time, you may hear the names of a few T-prefixed tax forms thrown about. It can get confusing, so let’s quickly set the record straight:
- T1: The general tax form you as an individual will submit when filing your taxes. It includes sections for reporting income, claiming deductions and credits, and calculating your tax obligation or refund. Maybe the most important part of your T1 is line 15000, which shows your total income before deductions.
- T2: Canadian businesses use this form to file their corporate tax return.
- T3: You’d fill out this form if you earned income as a beneficiary of a trust or estate over the year.
- T5: This is the form you fill out to report investment income earned as an individual. This will be sent to you by the financial institution holding your investment assets.
T4 and T4A slips set the baseline, not the final word.
Again, your T4 is a Statement of Remuneration Paid, which means it’s an account of all the money you earned last year and where CRA believes it’s all gone.
A professional accountant’s job is to fill CRA in on the rest of your story: any other money you spent that could be eligible for a tax deduction that reduces the total amount taxed by CRA, or a tax credit that reduces the final amount you owe after it’s been calculated.
A more commonly used deduction is the RRSP contribution: what you put into your RRSP over the course of a year (up to a certain amount) is deducted from your total taxable income. Other widely used deductions include TFSA contributions, claiming eligible expenses like medical bills and childcare costs, and income splitting between life partners.
The best accountant for you is the one who knows you.
When your financial life all runs through one office, everyone on your service team (tax accountant; insurance broker; wills & estates lawyer; investment advisor, etc.) knows you and will help you plan the best outcomes for your short-term tax obligations and long-term financial health. And, more importantly for the purposes of this discussion, an accountant who knows you will double check your T4 slip every year.
Do you have your T4? Get it double checked by an Optimize professional today. Because a great way to create wealth with intention is to protect it with equal intentionality.