Accounting businesses offer comprehensive payroll preparation and filing services to ensure that companies manage employee payments accurately and stay compliant with government regulations. Payroll can be complex due to various deductions, taxes, and filings required by different authorities, including the Canada Revenue Agency (CRA). Here’s a detailed breakdown of the payroll services typically provided by accounting firms:

1. Payroll Setup and Registration

• Payroll Account Registration: Accounting businesses help set up a payroll account with the CRA for businesses that are hiring employees. This is required for deducting and remitting employment-related taxes like CPP (Canada Pension Plan), EI (Employment Insurance), and income tax.

• Employee Classification: They ensure that employees are correctly classified (e.g., salaried, hourly, or contract workers) for tax purposes and ensure compliance with the CRA’s rules on employee versus contractor status.

• Direct Deposit Setup: Accounting firms can set up direct deposit systems so that employees are paid directly into their bank accounts on time.

2. Payroll Calculation

• Gross and Net Pay Calculation: Accounting firms handle the calculation of gross pay (total earnings before deductions) and net pay (take-home pay after deductions). This includes wages, salaries, bonuses, and overtime.

• Tax Deductions: They calculate and deduct the correct amounts for federal and provincial income taxes based on each employee’s earnings and applicable tax brackets.

• CPP and EI Deductions: For Canadian employees, payroll must include deductions for Canada Pension Plan (CPP) contributions and Employment Insurance (EI) premiums. Accounting firms calculate both employee and employer contributions.

• Other Deductions: In addition to tax and social program deductions, accounting businesses handle other payroll deductions, such as:

  • Health insurance premiums

  • Pension plan contributions

  • Union dues

  • Garnishments (e.g., child support or court-ordered payments)

3. Payroll Tax Remittance

• CRA Remittances: Accounting firms manage the remittance of payroll taxes to the CRA, including federal and provincial income tax withholdings, CPP contributions, and EI premiums. This ensures businesses meet their remittance deadlines (which can be monthly or more frequent, depending on the size of the payroll).

• Provincial Payroll Taxes: In some provinces, additional payroll taxes may apply, such as the Employer Health Tax (EHT) in Ontario. Accounting firms ensure that these taxes are calculated and remitted on time.

• Reconciliation: Firms reconcile payroll liabilities, ensuring that all tax and benefit amounts match what has been withheld and paid, preventing discrepancies during year-end filings or audits.

4. T4, T4A, and Other Year-End Filings

• T4 Slips and Summary: Accounting firms prepare and file T4 slips for employees, summarizing their earnings and tax deductions for the year. The corresponding T4 Summary is submitted to the CRA, which consolidates all employee payroll information for the business.

• T4A Slips: These are used for contractors or others who receive payments that are not regular wages (e.g., fees for services). Accounting firms prepare T4A slips when needed.

• Records of Employment (ROE): When an employee leaves a company (resignation, termination, or layoff), accounting firms prepare the Record of Employment (ROE), which is submitted to Service Canada and used for determining EI benefits.

• Other Year-End Reports: In addition to T4s, some businesses may require reports on special bonuses, taxable benefits, or pension contributions, all of which are managed by accounting firms.

5. Payroll Compliance and Advisory Services

• Regulatory Compliance: Payroll laws and tax regulations can change, so accounting firms keep businesses compliant with current CRA guidelines and any changes in tax rates or employment laws.

• Statutory Holidays, Vacation Pay, and Overtime: Accounting businesses ensure that payroll complies with provincial labor laws concerning statutory holiday pay, vacation entitlements, and overtime calculations.

• Advice on Employee Benefits and Compensation: Accounting firms provide advisory services on structuring compensation packages that are tax-efficient, including group benefits, pension contributions, and other perks.

6. Third-Party Payments and Benefits Management

• Remittance to Benefit Providers: If a company offers employee benefits like health insurance or retirement savings plans, accounting firms manage remittance to third-party providers for premiums and contributions.

• Health and Dental Plan Deductions: They ensure that any health or dental plan contributions by employees are deducted from payroll correctly.

7. Payroll Reporting

• Payroll Summary Reports: These reports provide a detailed breakdown of each payroll run, including gross wages, tax deductions, and employer liabilities. Businesses can use this information for budgeting and financial reporting.

• Year-End Payroll Reports: Accounting firms provide businesses with reports summarizing the total payroll expenses for the year, including wages, benefits, and taxes, which are useful for both internal accounting and CRA audits.

8. Employee Self-Service Portals

• Some accounting businesses provide access to employee self-service portals, where employees can view their pay stubs, tax slips (T4), and other payroll-related documents.

9. Payroll Audits and CRA Support

• Payroll Audits: If the CRA audits a company’s payroll records, accounting firms provide support by preparing documentation, ensuring that payroll records are accurate, and responding to CRA queries.

• Payroll System Audits: For companies with in-house payroll systems, accounting businesses may conduct audits to ensure that payroll processes are functioning correctly and that tax withholdings and remittances are in compliance with CRA rules.

10. Outsourced Payroll Services

• For businesses that prefer not to manage payroll internally, accounting firms offer full-service payroll outsourcing. This means the accounting firm handles everything related to payroll, from calculation to tax filing and remittances, allowing businesses to focus on their core operations.

11. New Hire and Termination Processing

• Accounting firms assist with new employee onboarding for payroll purposes, ensuring that appropriate forms (e.g., TD1 for tax credits) are completed and deductions are set up correctly.

• When an employee leaves, accounting firms manage the termination process, including issuing final paychecks, calculating severance (if applicable), and submitting the ROE.

12. Vacation and Leave Tracking

• Accounting businesses keep track of employee vacation days, sick leave, and other paid time off (PTO), ensuring that payroll reflects the correct pay and deductions during these periods.

Conclusion

Accounting businesses offer a wide range of payroll preparation and filing services to ensure accurate, timely, and compliant payroll operations. Whether for small businesses or larger companies, these services help manage employee compensation, deductions, and tax filings efficiently, freeing up businesses to focus on other areas.