Payroll year-end process

As the year comes to an end, it is essential to make sure your payroll information is current. While you wrap up payroll procedures and assess compensation and benefits for the upcoming year, you might benefit from using a year-end payroll checklist to stay on track with the various tasks tied to year-end payroll reporting and taxation.

Even experienced payroll experts can miss important steps during two pivotal moments: the final payroll of the current year and the first payroll of the new year. A well-structured year-end payroll checklist can help guarantee that you don’t miss any key steps in the process.

Understanding year-end payroll

Year-end payroll involves a thorough review and verification of financial data from the previous calendar year. Businesses must handle specific tasks related to year-end payroll, including:

• Correctly calculating tax obligations, employee earnings, and deductions that are to be withheld from employee wages.
• Reviewing relevant tax documents to ensure accurate tracking of all payments for the new year.
• Completing and submitting forms to the Canada Revenue Agency (CRA).
• Identifying and preparing for any changes to federal and provincial employment regulations that may impact your business in the upcoming year.

Using a payroll calendar can significantly enhance your planning for the forthcoming year. It helps ensure that all payroll-related tasks are completed on time and minimizes the risk of delays.

When does the payroll year end?

When handling payroll submissions and tax documentation, it’s important to be aware of significant year-end dates. The tax obligations for year-end payroll will differ based on the province, business size, type, and other variables, but most Canadian businesses will need to file the following:

• An annual corporate tax return, with deadlines varying by business structure (for example, if your corporation’s tax year ends March 31, your filing due date is September 30)
• T4 and T4A slips for employees and subcontractors by February 28.
• T4 Summary due by the end of February.
• GST/HST returns (if applicable) on a quarterly or annual basis, around the end of each applicable period.
• Payroll remittances for employee income tax, CPP, and EI, typically due on the 15th of the month following the pay period.

It’s important to start preparing for your year-end payroll taxes well before the year finishes. ADP’s payroll solutions help maintain accurate payroll records throughout the year, which assist in meeting deadlines and facilitating the payroll year-end process.

Year-end payroll checklist for the current year

A number of steps are involved in filing payroll taxes and preparing for year-end payroll. Here’s a closer look at what you can do now to get ready for the year-end, even before processing the last payroll:

1. Ensure business information accuracy: Ensure that your business information on file for tax purposes is accurate. This is a good time to confirm your Canada Revenue Agency (CRA) business number as well as your company name and address. Don't forget to check your provincial employer accounts as well.
2. Set the compensation framework for the coming year: As you prepare your budget for the upcoming year, consider any expected salary increases for your employees. The specific amounts will depend on the applicable laws (such as minimum wage or salary thresholds) and what you can afford based on current employee compensation and payroll taxes.
3. Evaluate year-end bonuses and incentives: Some companies choose to offer bonuses at year-end. While bonuses may be tax-deductible, it's important to know the timing for deducting them.
4. Inform employees about any unused benefits: Certain benefits that employees earned or contributed to during the year may expire at the end of the year. Review your company policies regarding these benefits and inform employees accordingly. These could include vacation, sick days, or personal leave. Consider whether unused days can be carried over based on your policies and relevant regulations.

This proactive approach to payroll will help maintain compliance with regulatory requirements and ensure a smoother transition into the new year.

Payroll checklist for the first payroll of the new year

While much of the preparation for your payroll year-end checklist can be completed ahead of time, several key steps must be taken after processing the final payroll period of the year. Once you've finalized the last payroll for the year, follow these essential actions:

1. Review employee earnings and benefits: Before closing out your payroll for the current year, carefully review all employee and company information for accuracy. Total each employee's wages, tax deductions, and benefits accrued throughout the year, and prepare summary figures for your entity's year-end tax filings. This includes any taxable benefits, which are typically included in an employee's income, such as personal days, sick leave, tuition reimbursement, company vehicles, or stock options. Ensure that all taxable benefits are reported accurately under employee earnings.
2. Distribute T4 slips to all employees: After processing the final payroll, you need to prepare and distribute T4 slips to your employees. The T4 slip summarizes employment income and deductions for the year. It is your responsibility to ensure that employees receive their T4 slips (or have access to download them) by the last day of February of the following year.
3. File year-end payroll tax forms with the Canada Revenue Agency (CRA) and remit taxes owed: In addition to adhering to payroll deadlines, you must ensure that any taxes owed for the year are paid on time. If your end-of-year payroll tax return indicates that your business owes taxes, these payments must generally be submitted electronically via the CRA's My Business Account portal. Note that corporations have specific filing deadlines; for instance, most corporate tax returns are due six months after the end of the fiscal year, while payments for taxes owed should be remitted as per CRA guidelines.
4. Establish a strategic payroll calendar for the upcoming year: After completing this year's payroll, take the time to review and adjust your payroll schedule for the upcoming fiscal year. Check that the pay period ending dates and quarterly payment dates do not coincide with holidays or weekends, which could hinder timely processing. Make any necessary changes to your schedule and outline your new payroll plan for the coming year.
5. Review any changes in applicable provincial/territorial minimum wage rates: Provinces and territories in Canada may revise their minimum wage rates to reflect the ongoing inflation and economic conditions that impact workers and businesses. Be sure to account for these changes when determining employee compensation for the upcoming year.

Frequently asked questions

What is payroll year-end?

Payroll year-end refers to the final quarter of the calendar year and the initial quarter of the subsequent year. This period is particularly hectic for HR and payroll departments, as they must fulfill various financial and tax obligations in accordance with local, provincial, and federal legislation in Canada.

These responsibilities typically include calculating tax liabilities and deductions, reviewing and filing tax returns, and preparing for upcoming changes to local, provincial, or federal tax regulations.

What is end-of-year payroll processing?

End-of-the-year payroll processing includes completing all employee payments for the year, verifying your payroll data, and finalizing all reports with the Canada Revenue Agency (CRA).

Learn More

Are you looking to accurately fulfill year-end payroll obligations? You can benefit from ADP’s payroll solutions.

Talk to us about your payroll challenges, and we’ll walk you through our solutions — including how companies like yours use them. Call 866-622-8153 or start a quote.

This guide is intended to be used as a starting point in analyzing payroll year-end process and is not a comprehensive resource of requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.