Year End Payroll Checklist: Key Steps for Canadian Employers

When the calendar year ends, many business owners breathe a sigh of relief—until payroll responsibilities come knocking. Closing out your year-end payroll correctly is not just about balancing numbers. It’s about compliance, accuracy, and ensuring your team is paid correctly while meeting every Canada Revenue Agency (CRA) requirement.

Whether you manage payroll in-house or through accounting software such as QBO, getting your year-end process right helps you start the new year clean and organized. This guide walks you through a complete year end payroll checklist for Canadian employers, explaining what to do, when to do it, and how to stay compliant.

1. Review Employee Information

The first step in your payroll checklist is to confirm that all employee details are correct. Mistakes in names, Social Insurance Numbers (SINs), or addresses can cause T4 or T4A form discrepancies later.

Check that every employee’s:

• Legal name matches their SIN record
• Address is current and includes postal codes
• Employment status is correctly recorded (active, terminated, on leave, etc.)
• Benefits and deductions align with their contracts

Taking time now to clean your employee database saves hours when filing year-end slips and responding to CRA queries later.

2. Verify Year-to-Date Totals

Before you prepare your year-end documents, cross-check your year-to-date (YTD) totals. Ensure wages, bonuses, taxable benefits, and deductions match the amounts remitted to the CRA throughout the year.

Pay special attention to:

• CPP contributions and EI premiums: Ensure no over- or under-deductions occurred.
• Taxable benefits: Company cars, life insurance, or wellness perks must be included.
• Vacation pay and bonuses: Confirm these are processed in the correct year.

If discrepancies appear, now’s the time to correct them in your payroll year end procedures, not after you’ve filed your T4s.

3. Reconcile Payroll Accounts

Your Accounting Services should include a reconciliation of payroll liability accounts against your general ledger. This ensures that all remittances sent to the CRA align with your payroll records.

Items to confirm:

• All payroll deductions have been remitted
• Employer contributions for CPP and EI match CRA guidelines
• Outstanding balances or variances are identified and corrected

If you work with an external partner such as Dua LLP, they can perform a detailed reconciliation and ensure your year-end payroll aligns with your financial statements.

4. Review and Process Final Payroll

Your final pay run for the year should include any outstanding wages, overtime, or bonuses. This ensures every amount is captured in the correct tax year.

Make sure:

• All pay periods for December are closed and recorded
• Any manual adjustments (like retroactive pay) are entered
• Payroll taxes are remitted by the deadline

Once the final payroll is complete, you can start preparing T4 and T4A slips with confidence.

5. Prepare T4 and T4A Forms

Every Canadian employer must issue T4 slips to employees and T4A slips to contractors by the last day of February following the tax year. These forms summarize employment income and deductions.

Here’s what to include:

• Total employment income (box 14)
• CPP, EI, and income tax deductions
• Employer contributions and taxable benefits

If you need professional guidance, Tax Services from Dua LLP can help you meet deadlines accurately and avoid costly penalties.

6. File and Distribute Slips to the CRA and Employees

Once prepared, you must file your slips and the T4 Summary electronically with the CRA. Distribute copies to employees by February 28.

Employers with more than 50 slips are required to file electronically. Even if you have fewer employees, digital filing through CRA’s My Business Account portal reduces processing time and error risk.

For compliance-sensitive companies, Compliance Services can simplify this step by managing your filings, ensuring all payroll information meets government standards.

7. Review Payroll Tax Remittances

Before closing your books, double-check that all payroll deductions have been remitted to the CRA. Late or incorrect remittances can trigger penalties and interest.

Your payroll year end procedures should include:

• Reviewing all remittance receipts for the tax year
• Comparing totals to CRA statements
• Correcting discrepancies immediately

If you discover an error, contact the CRA right away and adjust your records through your accounting software or Business Advisory Services partner.

8. Balance Your General Ledger

Balancing your payroll expenses against your general ledger ensures your financial statements reflect true payroll costs. This step helps maintain accuracy for your year-end review and future audits.

Your accounting partner should reconcile:

• Wages expense accounts
• Employer benefit accounts
• Source deduction liabilities

If you’re preparing for an internal or external audit, Audit Services and Assurance Services can validate that your payroll data is accurate and complete.

9. Update Payroll Records for the New Year

Once the prior year’s payroll is closed, reset your system for the new year. This ensures a smooth start to January and prevents data overlap.

You’ll need to:

• Update employee vacation accruals
• Review tax tables and CPP/EI limits for the new year
• Carry forward balances for benefits and deductions

If you use QBO or similar software, ensure updates are applied automatically to avoid errors in upcoming pay runs.

10. Communicate with Employees

Transparency helps avoid confusion at tax time. Notify employees when T4s will be available and explain how to access them. Encourage them to review slips early in case corrections are needed before filing personal returns.

Effective communication builds trust and helps you avoid unnecessary follow-ups with the CRA.

11. Seek Professional Guidance

Year-end payroll involves multiple moving parts—tax compliance, employee records, CRA deadlines, and accounting accuracy. Partnering with a trusted accounting team can help streamline your process and minimize the risk of penalties.

Dua LLP offers full Accounting Services, Fractional CFO Services, and advisory support designed to simplify payroll management for Canadian employers.

Final Thoughts

Year-end payroll is more than just a routine task. It’s an opportunity to confirm compliance, strengthen your financial systems, and set your business up for a smoother year ahead.

If you want to simplify the process, reduce errors, and stay fully compliant with CRA standards, consider professional support from Dua LLP. Our integrated Tax Services, accounting, and advisory expertise help Canadian employers close the year confidently and prepare for a successful new one.

Book A Call today to review your year-end payroll procedures and build a plan that keeps your business compliant and ready for growth.

FAQs