Understanding the T4 Slip 

A T4 slip is a document that details the salary and wages paid by a Canadian corporation to its employees. If you’re tasked with preparing a T4 slip, follow this simplified 12-step guide: 

1. Corporation’s Details:

• Input the employer’s name at the top left. 
• Provide the employer’s payroll account number in box 54. 

2. Employee’s Details:

• Jot down the employee’s name and address. 
• Insert the employee’s social insurance number in box 12. 

3. Specify the Employment Province:

• Indicate the province where the employee works. For instance, if they work in Ontario, mention Ontario. 

4. Indicate the Year:

• Mention the year for which the salary was paid, for example, 2016. 

5. Employment Insurance (EI) Exemption:

• Determine if the employee is exempt from EI premiums. Typically, shareholders and their family members owning over 40% of the company’s voting stock are exempt. If not, they must contribute to the EI program. 

6. Canada Pension Plan (CPP) Contribution:

• Ascertain if the employee is exempt from the Canada Pension Plan. Most Canadians are required to contribute 

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7. Gross Salary Details:

• Input the total gross salary or wages the employee received in the specified year in box 14. For this example, let’s consider an amount of $35,000 for 2016. 

8. CPP Contribution Amount:

• Deduct and mention the CPP contributions from the employee’s salary. The rate is 4.95% for any salary amount exceeding $3,500. For a salary of $35,000, the contribution would be $1,559.25. 

9. Employment Insurance Premiums:

• Input the total EI premiums deducted from the employee’s salary in box 18. The EI rate is 1.63% of the salary. So, for a $35,000 salary, the EI premium would be $570.50. 

10. Income Tax Deduction:

• Mention the total income tax deducted from the employee’s salary in box 22. It’s advisable to use the CRA’s online payroll calculator for accurate deductions. For this example, let’s consider a deduction of $4,791. 

11. EI Insurable Earnings:

• This is the same as the gross salary mentioned in box 14. In our example, it’s $35,000. 

12. Summarize the T4:

• Complete the T4 summary which consolidates all the data from each T4 slip. If a corporation has multiple employees, multiple T4 slips might be issued. Don’t forget to mention the year and your company’s payroll account number on the summary form.