The Canadian Revenue Agency (CRA) requires all employers in Canada to make payroll deductions from the salaries, wages, or other payments made to employees. These payroll deductions include federal and provincial/territorial income tax, deductions from CPP contributions, and EI premium deductions.
On the other hand, employees can determine the amount that will be deducted from their pay during a payroll period using our payroll calculator for Canada. The payroll deductions online calculator (PDOC) allows employees to accurately work out the salary or pay they will receive during a payroll period after deductions are made.
Unfortunately, not everyone is using the payroll deductions calculator. This often results in the wrong amount being deducted from an employee’s salary/pay. The good news is that the CRA has already outlined the steps to take in case the payroll amount deducted from an employee’s pay is incorrect.
Who Is Responsible for Deducting Taxes and Benefits from The Pay of Employees?
All employed individuals in Canada have certain tax responsibilities. They not only need to pay income taxes but are also required to file their income tax returns. On the upside, employed individuals can claim any credits or deductions that they are eligible for when filing taxes to lower their tax bills.
Employees are not the only ones with tax responsibilities; employers are responsible for making deductions and paying taxes too. In fact, it is the responsibility of the employer to deduct taxes and benefits from their employees’ pay. The payroll deductions required are mentioned above.
At times, employers do not have the required level of attention when making payroll deductions on behalf of their employees. This generally results in incorrect deductions. Incorrect payroll deductions are a major point of contention between employees and their employers.
The best way to avoid disputes or worse litigation in case of incorrect payroll deductions is to have the aggrieved employee and the relevant representative of the employer sit together to resolve the matter amicably.
What Is the Best Way to Resolve Incorrect Payroll Deductions?
If you believe that your employer has over-deducted or under-deducted your pay during a payroll period, then you can get this adjusted on your next pay. However, if you reach this realization in the next year, then they should not seek T4 adjustment. Instead, the adjustment will be made when you file your tax return.
What is T4? It is a slip that indicates all the payments made to an employee during a calendar year. This includes the amount deducted for income tax and the taxable benefits. The T4 slip that an employee receives from their employer contains the same information that is sent to the government.
What to Do If Your T4 Does Not Match Your Pay?
If you find that the information on the T4 slip provided by your employer is incorrect, then you should immediately request your employer to issue you a replacement or adjusted T4 slip. The incorrect information in your T4 could be related to the amount that was deducted at the source or how much you earned.
In either case, you have the right to request your employer for a replacement T4 slip. After you make the request, your employer will need to create a new T4 slip with the word ‘amended’ written on it and then send it to the regional center of the Canada Revenue Agency (CRA). This is required to amend the T4 slip after it is filed.
What If Your Employer Refuses to Amend the T4?
In case your employer does not provide you with an amended T4 slip for any reason, you should record your communication and then file your tax return by submitting the correct information. This should include the amount of money you actually earned as well as the amount that was deducted at source.
The Canada Revenue Agency (CRA) is likely to spot the mismatch and audit you to get the correct information. By looking at the records you provided them, the CRA officials will know the exact difference between how much you earned and how much was paid/deducted by your employer. In case discrepancies are found, your employer will be audited by the CRA. This is likely to solve your problem of incorrect payroll deductions.
At times, it is not the intent of an employer to provide wrong information about an employee’s pay and related deductions to the CRA. Instead, the problem arises from not having the right resources to calculate these amounts. This is why using our payroll calculator for Canada is highly recommended to both employers and employees.