Enter the taxable benefit and have the taxes calculated. Then take the total amount of chq and apply against Income tax so that the chq nils to zero. Use the last Day of the year Dec31/14 and for ChqNbr use something like AdjustTaxBen. If the employee had already maxed out on their CPP and EI then you can clear out the inc tax total to make the chq a zero amount.

Next is to find out if you are now owing CRA becus of the above.

Thanks so much for the reply smithco.

I'm sorry to say, but I need a little more hand-holding than that...

When you say, "enter the taxable benefit and have the taxes calculated", do you mean take the total for the year and divide it by the number of pay periods and add that to a pay cheque to calculate the additional income tax?  From that I can figure out the total income tax that should have been deducted for the year.

Second, when you say, "then take the total amount of chq and apply against Income tax", how do I do that exactly?

OK - I'm assuming that all the employees have been paid their final chq for the 2014 year and you did not include the taxable benefit that SHOULD have been on their paychqs all along for 2014.

And likely you have already paid the Dec/14 remittances that would have been due by Jan15/15.

So now you need to correct their 2014 earnings before doing the T4s.

Pull up the payroll chq in the payroll module, enter the employee's name, enter chq nbr as TaxBenAdjust

and enter the date as Dec31/14.

Now on the payroll chq you are on the 'Income' tab and on the right side it says 'Other Amounts' and that includes Advances, Loans, and Benefit.

In the benefit section enter in the 'This Period' column the total benefit for the year 2014. You will now see that the payroll chq amount is a negative number.

Click on the 'Taxes' tab and you will see where the CPP, EI, and income tax likely have amounts in them.

You cannot change CPP or EI - they need to stay as whatever the amount they are showing.

So take the Tax amount and subtract the total of the Net Pay from it so that the paychq now says Net Pay of nil (zero). If the tax says 20.00 and your net pay says -37.53 then change income tax to read -17.53 (a negative amt).

Now you can post that and the earnings will be correct for the T4s.

Hope this helps.

that helps a lot.  thanks again smithco!

one thing is that because I'm adjusting in the prior year, it doesn't calculate the deductions automatically.  I manually calculated the taxes, entered the amount on the pay cheque, and then made salary equal to net pay to make it zero.  Does that make sense with what you're saying?

No - if you made the salary equal to net pay to make it zero then you are changing the salary earned.

For examples salary is showing as 0.00 and net chq was -35.00 so now you changed the salary to read as -35.00? You can't do that. You need to change the 'income tax' to an amount that will make the net pay as zero as per my instruction below:

So take the Tax amount and subtract the total of the Net Pay from it so that the paychq now says Net Pay of nil (zero). If the tax says 20.00 and your net pay says -37.53 then change income tax to read -17.53 (a negative amt).

Also every year before changing the date to Jan 1 you should do a 'Save As' of your data file to a new name called Company Name 2014Paryoll - the year that just finished.  That way if you need to do any adjustments you still have the ability to change it with the proper tax calculation and then you can repost it in the current data file.

Hope that makes sense.

That's a good tip for before changing the year over.  I really wish I had done that.

So, here's exactly what's happening using close to real numbers:

I'm doing a pay cheque for only the total annual taxable benefits = $700

I manually calculated $200 of income tax, while CPP and EI are maxed out for the year and are zero.

The net pay then equals -$200 because it is deducting $200 from zero.

So if I am to adjust the income tax to make net pay zero, then I would have to make income tax zero as well.

Or possibly I'm missing something?

You are correct - if CPP and EI are maxed out then income tax will remain as zero. It will be up to the employee to pay the extra income tax on their personal tax returns. You may want to let the employees know that the income tax may be understated on their earnings for the year - its up to you.