T4s and RL-1s: Year-End Payroll Reporting – A Complete Guide by a Montreal CPA Firm Near You

Introduction

For Canadian employers, year-end payroll reporting is a major compliance obligation. Every business that pays employees must prepare T4 slips (federal) and, for Quebec employers, RL-1 slips (provincial). These forms report employment income, taxable benefits, CPP/QPP contributions, EI/QPIP premiums, bonuses, commissions, and other payroll-related amounts. Errors in T4/RL-1 reporting—such as missing slips, incorrect taxable benefits, or mismatched totals—can trigger CRA or Revenu Québec audits, penalties, and interest. Understanding how to prepare T4s and RL-1s correctly ensures accurate reporting, protects employees’ tax filings, and keeps your business compliant.

Legal and Regulatory Framework

T4 and RL-1 reporting is governed by the Income Tax Act, the Canada Pension Plan Act, the Employment Insurance Act, and Quebec’s Tax Administration Act. Employers must:

• issue T4 slips for all employees paid in the year
• issue RL-1 slips for all Quebec-based employees
• file T4s with CRA and RL-1s with Revenu Québec
• submit T4 and RL-1 summaries
• include all earnings, deductions, and taxable benefits
• match remittances to what was actually withheld and remitted
• file slips by February 28 each year
• maintain full payroll records for at least six years

What Must Be Included on a T4?

• employment income
• taxable benefits (car, allowances, insurance premiums, gifts over limits)
• bonuses and commissions
• pensionable and insurable earnings
• CPP and EI contributions (both employee and employer)
• income tax withheld
• union dues, RRSP contributions, other deductions

What Must Be Included on an RL-1?

• Quebec source deductions
• QPP contributions
• QPIP premiums
• Health Services Fund (HSF) implications
• taxable benefits under Quebec legislation
• Quebec income tax withheld

Because Quebec administers its own payroll system, RL-1 rules differ in several key areas, especially for taxable benefits.

These regulations form the framework for federal and Quebec year-end payroll reporting.

Key Court Decisions

Several important rulings highlight the seriousness of T4/RL-1 compliance:

1. Soper v. Canada

Directors were held personally liable for unremitted payroll deductions, reinforcing that T4/RL-1 reporting errors can expose employers to liability.

2. Royal Winnipeg Ballet v. Canada

Misclassification of workers resulted in incorrect T4 reporting and retroactive payroll reassessments.

3. Hickey v. Canada

The employer’s failure to properly calculate and remit CPP/EI resulted in penalties upheld by the court.

4. ConCreate USL Ltd. v. Canada

Payroll records and T4 errors triggered a major CRA audit, with the court supporting CRA’s findings.

These cases demonstrate that T4/RL-1 accuracy is essential and errors are costly.

Why CRA and Revenu Québec Target This Issue

Payroll slips are one of the most audited areas because errors directly affect employee tax filings and government trust funds. Authorities target:

• employers failing to issue required slips
• mismatched totals between T4/RL-1 and T4/RL-1 summaries
• payroll deductions withheld but not remitted
• taxable benefits omitted or undervalued
• incorrect CPP/QPP, EI/QPIP calculations
• employers issuing T4As instead of T4s for workers who should be employees
• duplicate slips or missing SIN validation
• RL-1 errors caused by misunderstanding Quebec’s unique payroll rules

Revenu Québec audits payroll far more aggressively than other provinces.

Mackisen Strategy

At Mackisen CPA Montreal, we ensure flawless T4 and RL-1 preparation through a structured, audit-proof process:

1. Payroll Reconciliation

• verify gross earnings, deductions, CPP/QPP, EI/QPIP, and taxable benefits
• match payroll records to CRA/Quebec remittances
• correct variances before slips are issued

2. Taxable Benefits Review

• calculate personal-use automobile benefits
• assess cellphone and internet benefits
• include gift and award taxable values
• ensure Quebec-specific benefit rules are followed

3. Preparing T4 & RL-1 Slips

• complete each slip with accurate employment codes and boxes
• ensure consistency between T4s and RL-1s for Quebec employees
• prepare federal and provincial summaries

4. Filing and Distribution

• e-file T4s with CRA and RL-1s with Revenu Québec
• deliver employee copies before February 28
• maintain complete payroll documentation

5. Audit Protection

• respond to CRA or Revenu Québec payroll reviews
• prepare defence files for taxable benefit disputes
• correct prior mistakes with amended slips when necessary

This ensures accurate filings, satisfied employees, and complete compliance.

Real Client Experience

A Montreal tech startup failed to include taxable cellphone benefits on RL-1 slips. Revenu Québec reassessed the employer. We corrected the slips and implemented proper benefit tracking.

A construction company reported wages incorrectly due to manual payroll. CRA audited and found calculation errors. We rebuilt the payroll system and automated the remittance process.

A clinic misclassified contractors who should have been employees. CRA required retroactive T4s. We corrected their filings and restructured their staffing model.

Common Questions

Employers often ask whether T4s are required for owners. Yes—if owners receive salary.
Others ask whether RL-1s are required for remote workers. Only if they are Quebec employees.
Some ask whether taxable benefits must be prorated. Yes—benefits must reflect actual usage.
Another question: What if an employee lost their T4? Employers can issue duplicates.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal prepares accurate, compliant, audit-ready T4 and RL-1 slips for businesses of all sizes. Whether you’re hiring your first employee or managing a full staff, our experts ensure precision, timeliness, and full CRA and Revenu Québec protection.