Annual T4 Summary Reconciliation

by Peggy
(Alberta, Canada)

Hi. I have a big problem that I need help with ASAP.

I use Simply Accounting (now Sage 50 - Canadian Edition). I'm a bookkeeper working from home. I completed books for my client (a corporation with Sep 30, 2011 fiscal year-end) in April, 2012 (s/he was late getting things to me) and sent it all to the accountant for completion of corporate taxes and a T4.

During 2011, the shareholder was doing their own payroll, but had messed it all up. S/he was not remitting on time and had various other issues which included deducting and remitting E.I. I sorted it out based on the cheques issued and the remittances made; then posted all the payroll.

I asked the accountant to review my work and issue the T4 (because this was my first time with payroll and I wanted the accountant to check it). The accountant said they would file the T4 but DID NOT.

Now several months have gone by and yesterday I received a call from CRA asking me for the T4 and the T4 Summary because the accountant says their office does not issue T4s.

I printed the T4, but there is a problem. The shareholder deducted E.I. during that year and paid the employee (EE) and employer's (ER) portion (1.4 of EE) to CRA.

When the client realized that EI should not have been deducted, CRA was contacted. CRA advised deduct the EI payments (EE + ER = z) from their next remittance, which was done on December 16, 2011.

Below is my entry for the remittance paid to CRA:

CPP Payable (Acct 2185) xxxx DR
Fed Tax Payable (Acct 2190) yyyy DR
EI Payable (Acct 2180) zzzz CR
Acct Payable (Acct 2100) x+y-z CR


The T4 Summary shows that the shareholder owes the EI (amount z) and box 18 on the T4 shows the EE amount of EI paid.

What adjustments do I need to make in Simply so this amount does not show up on the T4 and the T4 Summary is correct? Can I date the entry 2011 without messing up things in my current year? Or should I manually do a T4 and T4 Summary and make the Simply Accounting adjustments required in the current date?

If I do it manually, I'm not sure what to do with the EE amount of EI paid in box 18 and I still need to know what adjustments to make in Simply Accounting. The good news is that the client did not have any payroll in 2012 and took draws instead.

Thanks for your help.






Hi Peggy,

CRA explains what to do when you have an EI overpayment on their website.

It explains that you do not include the reimbursed amount on the T4 slip. This means box 18 should be blank.

When I'm not sure how my software works and I have reporting to go out to CRA, I manually prepare the reports, sent them out then deal with how to record the entries in the software.

I suggest you manually prepare your T4 and T4 Summary so CRA gets the correct reporting. Your T4 Summary will show and should show EI payments as zero. Initially I wanted to say the overpayment (amount z) will show up as that was included in the actual amount paid to CRA. However, you said the December remittance was reduced by the over remittance of EI so I'm thinking your calendar year amounts for 2011 should be correct.

Question for you Peggy. Are you sure your T4 Summary is showing the shareholder owing ... which indicates an under remitted amount not an over remittance?

I don't use Sage 50 (previously Simply Accounting) so I'm not sure how you correct payroll in that particular software program. I'm guessing there is an adjustment button somewhere in your payroll module.

QuickBooks has terrific help instructions. I would assume Sage 50 would as well. Search your help for how to adjust your payroll module.

As the 2011 books have already been filed, I'd make my payroll adjusting entries in December 2011 when you reduced your remittance. Here is a link to QuickBooks instructions on to correct an overpayment of a payroll liability, perhaps you can figure out how to do the same thing in Sage 50.

http://support.intuit.ca/quickbooks/en-ca/iq/Payroll-Tax/Correct-overpayments-of-payroll-liabilities/HOW15259.html

You mentioned the shareholder took draws in 2012. As the business is incorporated, owner managers cannot take draws. Draws are what sole proprietors or partnerships take. I sure hope your client had a shareholder loan amount in a credit balance to offset their "draws".

Have a read through my chat on owner manager remuneration.

Hope this helps Peggy.





P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.

 
 

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