Payroll year end starts before your final payday, not when T4 slips are due. The payroll records you close out now feed the slips, remittances, and reports you file later. The year-end process moves through specific phases on a timeline, beginning with your final payroll, continuing through required tax forms, and ending with new-year setup.

This guide walks through the process in order, from your final payroll to year-end forms and new-year setup. Use it alongside the downloadable payroll year-end checklist to assign each task, set due dates and track what’s complete.

What is payroll year end in Canada?

Payroll year end in Canada is the process to close your payroll records for the calendar year, complete required information returns and prepare payroll for the next year. Your business’s fiscal year doesn’t change the calendar year used for payroll records. The date you pay an employee determines which year that income belongs to.

The Canada Revenue Agency (CRA) requires employers to report income on a T4 slip for the year they paid it. See the CRA’s T4 guide for federal T4 requirements.

Payroll year end has three parts: close the year’s payroll records, file and provide required slips and summaries, then set up payroll for the new year. The forms and steps depend on who you paid and where your business operates.

Quebec employers have separate provincial payroll requirements. Refer to Revenu Québec’s source deduction and employer contribution requirements for Quebec-specific rules.

What should be on your Canadian payroll year-end checklist?

Your Canadian payroll year-end checklist should cover 14 tasks, from your final payday through the first payroll of the new year. Start with pay dates and employee records, reconcile payroll totals and remittances, prepare year-end slips and finish with new-year payroll setup.

Before the final payroll

1. Confirm your final payday and payroll cut-off

Start with the date employees will receive their final pay of the year. Account for bank holidays and direct deposit lead times when you set your payroll cut-off.

2. Verify your business and payroll account details

Your legal business name and address should match the details tied to your CRA payroll program account. Confirm your remitter type and account details, especially if your business structure changed over the year.

3. Update employee records

Each employee record should have the legal name, current address, Social Insurance Number (SIN), province of employment, employment status and tax profile you need for year-end slips. Fix outdated information before you prepare those slips.

4. Account for every payroll

Your year-to-date payroll should include every pay run from the calendar year, such as off-cycle pay, manual entries and prior payroll history.

Let’s look at a five-employee service business as an example. Say you run a separate payroll to issue an employee bonus—that payment still needs to be included in your annual totals. If it’s left out, your wages, deductions, and tax remittances won’t reconcile at the end of the year.

5. Add compensation, benefits and adjustments

Add bonuses, commissions, taxable benefits, reimbursements, vacation pay, statutory holiday pay, deductions and payroll adjustments that apply. Tax treatment differs by benefit and allowance. Use the CRA taxable benefits and allowances chart to confirm how Canada Pension Plan (CPP) contributions and Employment Insurance (EI) premiums and income tax apply.

After the final payroll and before you file

6. Reconcile payroll with your books and bank activity

To revisit our previous example, match gross wages and employer payroll costs from the payroll report to the ledger. Match net pay to bank payments. Then compare CPP contributions, EI premiums, and income tax deductions with payroll liabilities and CRA remittances. A careful check from the payroll report, to the ledger, and to the bank shows where a difference starts. Wave Payroll connects with Wave Accounting so payroll data flows into your books.

7. Resolve CPP, EI and income tax differences

CPP contributions and EI premiums have annual maximums, while exemptions affect some employees.

For our five employees, compare each person’s year-to-date deductions with the payroll record. Resolve differences before those amounts reach the T4.

8. Close the final payroll and remittance

Complete the final payroll, then total employee income tax, CPP and EI plus the employer share of CPP and EI. Your remitter type sets your payment schedule. The CRA payroll remittance due dates set out the schedules for each remitter type.

9. Account for employee departures and ROEs

An employee with insurable employment who stops work and has an interruption of earnings requires a Record of Employment (ROE). Service Canada uses the ROE to assess Employment Insurance claims. The Service Canada employer ROE guide covers when to issue one, deadlines and required information.

10. Identify contractor tax forms

Keep contractor payments separate from employee payroll. Verify each contractor’s name, address, required tax identifier and annual payment total before you prepare a tax slip.

A T4A reports fees or other amounts for services in applicable cases. A T5018 applies when more than 50% of your business income comes from construction activities and you paid a Canadian resident subcontractor more than $500 for construction services during the calendar year, excluding GST/HST.

In the case of our five-employee service business example, if you pay an independent contractor, that payment shouldn’t become a sixth employee payroll record. Rely on the CRA T4A requirements or CRA T5018 requirements based on the specific payment and business type.

11. Validate T4 slips and the T4 Summary

Each T4 should match the annual payroll records from the reconciliation step. The T4 Summary must reflect the totals from those slips. As a reminder, the CRA reports employment income on the T4 for the year the employee receives the pay.

12. File and provide year-end slips

Once the slips match your source records, file the required information returns and provide employee copies by the last day of February following the calendar year. Save your submission confirmation with your year-end payroll records.

After you file and before the first new-year payroll

13. Set up the new payroll year

Start the new year with current employee tax profiles, payroll rates, thresholds, remittance frequency and pay dates. Add statutory holidays to your payroll calendar, carry forward the correct vacation balances and set internal approval dates for each pay run.

14. Build your year-end payroll file

Keep payroll reports, T4 slips and summaries, applicable contractor slips, remittance records, adjustment support, submission confirmations and your completed checklist together. Keep most payroll records for six years from the end of the last tax year they relate to under the CRA record retention rules. 

For Wave-specific year-end steps, use Wave’s Canada payroll year-end checklist.

What payroll year-end mistakes should you avoid?

Common payroll year-end mistakes include late reconciliation, incorrect pay dates, missed compensation, outdated employee details, and incomplete contractor records. Waiting to reconcile year-to-date totals until T4 slips are ready allows errors to carry into your final forms. To maintain accurate books and avoid remittance issues, audit your payroll data early, confirm all off-cycle payments, and verify employee information before the calendar year closes.

Reconcile payroll before T4 season

If you wait until T4 slips are ready to compare totals, a payroll error can carry into your year-end forms. Reconcile year-to-date payroll first and trace differences to their source to ensure accurate records.

Use the pay date instead of the pay period end date

A December pay period with a January payday belongs to the new calendar year. The Canada Revenue Agency (CRA) confirms that T4 income belongs to the year in which you paid it.

Include all compensation and benefits in annual totals

Bonuses, commissions, taxable benefits, vacation pay, statutory holiday pay, reimbursements, off-cycle pay, and manual cheques affect deductions, remittances, and employee slips. Ensure your annual totals capture every payment type.

Update employee details regularly

An old address, legal name, Social Insurance Number (SIN), province of employment, or tax profile creates errors on year-end records. Verify this information with your employees prior to processing tax documents.

Match the correct tax form to each contractor

Contractor payments follow different tax form rules based on the work provided. T4A and T5018 requirements depend on the payment and business type, so review CRA guidelines for each vendor.

Review your responsibilities alongside your payroll software

Payroll software requires your oversight for year-end compliance. Tax services and forms depend on the software, your account settings, and required authorizations. Wave Payroll streamlines much of this process, but you remain responsible for certain contractor returns, including T5018 forms.

Monitor payroll cut-offs and remitter changes

Bank holidays, direct deposit lead times, or a new CRA remitter type change your year-end schedule. Check your calendar and remittance frequency early to prevent missed deadlines.

Record reasons for past payroll edits

An edit to prior payroll affects slips, remittances, and your books. Record the reason for the change and update each affected year-end record to maintain a clear audit trail.

How can payroll software simplify payroll year end?

Payroll software simplifies year-end tasks by centralizing your data and reports in one system. When your tools work together, your books stay accurate. A connected platform links your payroll directly to your accounting records, allowing you to easily compare annual wages, deductions, and employer remittances against your bank activity before you submit required tax forms.

For a small business, a single payroll report provides the source for all annual wages and employer amounts. You can compare these totals directly with your books without maintaining a second set of manual records. If a discrepancy occurs, the system provides a clear trail to trace the difference so you can run your business with financial confidence.

With Wave Payroll*, your payroll connects natively with your accounting data in the same small business management platform. Wave supports T4 and T4A slips and summaries for Canadian customers, keeping your records up to date and in one place. Use our Canada payroll year-end checklist for Wave-specific steps to stay organized year-round.

How should you wrap up payroll year end?

Close payroll year end with each required form, remittance and payroll record complete, plus payroll ready for the new year. Give each task an owner and use current CRA requirements rather than dates, rates or thresholds from a prior tax year.

Use the downloadable payroll year-end checklist to track all 14 tasks, due dates and completion details. Update the tax year and source links before you use it next year.

For payroll that connects with your Wave books,

Canadian Payroll Year-End FAQs

What happens if I miss the T4 deadline?

 The CRA charges a penalty for late T4 slips. The minimum penalty is $100. If you issue more than five slips, the fine grows by $5 to $75 per day, up to a maximum of $7,500. Submit your slips on time to avoid these extra costs.

What is CPP2?

 CPP2 is a second Canada Pension Plan contribution tier for higher earners. It only applies to income between the first earnings ceiling ($74,600 in 2026) and the second earnings ceiling ($85,000).

What should I do if payroll deductions don’t match my records?

Find the source of the difference before you finalize your year-end slips. If you deducted too much or too little CPP, EI or income tax, the correction depends on the deduction and whether you’ve filed your information return. Follow the CRA payroll deduction correction rules before you update your payroll records or slips.

What if I find a payroll error after I file T4 slips?

Correct the affected information. The CRA has separate processes to amend, cancel, add or replace T4 slips based on the error.

What happens to payroll if my business structure changes?

A change to legal status or ownership can require a new business number and payroll program account. CRA program accounts tied to the old business number don’t transfer to the new one.

How does payroll work if an employee works in more than one province?

If an employee worked in more than one province or territory during the year, you need a T4 slip for each one. The CRA T4 guide covers these cases.

How do payroll rules work for remote employees in another province?

A remote employee’s home address doesn’t determine their province of employment. The CRA province of employment rules use the employee’s work relationship with your establishments.

What happens to payroll year end if an employee dies?

Report income paid to the employee during the year on a T4 slip. A death benefit paid to a spouse, partner or heir belongs on a T4A slip.

What if I forgot an employee’s T4 after I already filed?

Submit the omitted T4 as an additional slip. Don’t amend the original T4 Summary solely to add the omitted slip.

Can someone else file payroll tax slips for my business?

Yes. An authorized representative, such as a tax preparer, can submit electronic information returns for your business through CRA services.

Can a business have more than one CRA payroll account?

Yes. If you have more than one payroll account, file a separate T4 return for each account and direct each remittance to the correct account.