Reassessments after payroll compliance reviews

Following a payroll compliance review, a payroll trust accounts examination, or an employer compliance audit, T4 or T4A slips may be corrected to reflect accurate income, withholdings, or other tax-related information of workers. This is done to make sure that employers or payers are fully compliant with their tax obligations for the period under review.

As a result of these corrections, changes to the worker’s previously filed income tax and benefit returns will be required.

How the process works

1. CRA provides additional or amended T4 or T4A slips to the employer or payer

   After a payroll compliance review, a payroll trust accounts examination or an employer compliance audit, the CRA will provide additional or amended T4 or T4A slips if the review found the employer or payer failed to properly:

   • Report income or payroll deductions
     

     Learn more: Fill out the slips and summaries

   • Report taxable benefits
     

     Learn more: Determine if a benefit is taxable

   • Deduct Canada Pension Plan (CPP) contributions
     

     Learn more: About the deduction of Canada Pension Plan (CPP) contribution

   • Deduct Employment Insurance (EI) premiums
     

     Learn more: About the deduction of Employment Insurance (EI) premiums

   • Determine the employment status of their workers
     

     Learn more: Determine the relationship with the employer or the payer

   Common corrections to T4 or T4A slips

   The CRA may amend previously filed T4 or T4A slips to correct the reporting by the employer or payer by increasing or reducing the amount reported on the slip.

   The CRA may also add T4 or T4A slips when a slip was not originally filed or when the employment status has been determined to differ from what was reported on the original slip.

   Changes are most commonly made to the following boxes or codes:

   • T4 slips

     • Employment income (box 14)
     • Employee’s CPP contributions (box 16)
     • Employee’s second CPP contributions (box 16A)
     • Employee’s EI premiums (box 18)
     • Income tax deducted (box 22)
     • Insurable and pensionable earnings (boxes 24 and 26)
     • Taxable benefits (codes 30, 32, 33, 34, 36, 38, 40, or 90)

   • T4A slips

     • Self-employed commissions (box 020)
     • Income tax deducted (box 022)
     • Other income (box 028)
     • Fees for services (box 048)

2. Employer or payer distributes additional or amended T4 or T4A slips to the workers

   The employer or payer must distribute the additional or amended T4 or T4A slips to the workers concerned.

   Learn more about the obligation to distribute tax slips: Distribute the slips

   Impact on taxes and benefits for workers

   Changes to T4 or T4A slips can have a direct impact on a worker’s previously filed income tax and benefit returns.

   Examples of impacts on taxes and benefits

   The following are examples of changes to the T4 or T4A slips that can have a direct impact on previously filed income tax and benefit returns:

   Increased or decreased income

   • If the changes show that the worker earned more than previously reported, their tax liability will increase, meaning they could owe more in taxes or be entitled to a lower tax refund when their return is reassessed.
   • If the changes show that the worker earned less than previously reported, their tax liability will decrease, meaning they could owe less in taxes or be entitled to a larger tax refund when their return is reassessed.

   Adjustments to payroll deductions

   • If the correct amount of income tax deducted, CPP contributions, or EI premiums withheld were not originally reported, the adjustment will ensure the worker receives credit for the payroll deductions actually withheld.
   • If the correct amount of CPP contributions or EI premiums were not originally withheld (not enough withheld), the adjustment will ensure the correct payroll deductions are now reported, increasing the payroll deductions reported on the income tax and benefit return.
   • If too much was initially withheld, a correction to the pensionable and insurable earnings could result in lower tax payable or a larger tax refund, depending on the circumstances, due to an overpayment of CPP contributions or EI premiums.

   Change in employment status

   In addition to income and payroll deduction reporting corrections, changes to the T4 or T4A slip may have been made to correct how the worker’s employment status was reported:

   • If the review determined that the worker was incorrectly treated as a self-employed worker instead of as an employee (or the reverse), this will result in their T4A slip being replaced with a T4 slip (or the reverse).

     It will also impact whether CPP contributions, EI premiums and income tax deductions should have been withheld from their earnings.

   • If the worker’s employment status was changed, this could affect their tax obligations, eligibility for benefits, and even the types of income tax deductions they are entitled to claim. The worker may have to submit a request for reassessment of their return to correct how they claimed deductions on their return (as employment expenses or business expenses).

   Tax credits and benefits

   The amounts reported on the T4 or T4A slip affects eligibility for certain tax credits and government benefits (for example, Canada Child Benefit and GST/HST credit).

   If the worker receives any government benefits, they should verify whether the adjusted income will impact these benefits. In some cases, it could lead to a reduction or an increase in benefits.

   What happens if the employer or payer does not distribute the T4 or T4A slips

   If the employer or payer does not distribute the T4 or T4A slips to the worker, the worker can get a copy from the CRA.

   Learn more on how the worker can get a copy of the slip if they did not receive it: Get a copy of your slips

3. CRA makes a reassessment or worker submits a request to reassess their return

   Depending on the payroll compliance program, the CRA will make a reassessment to the worker’s previously filed income tax and benefit return, or the worker will need to submit a request to reassess their return.

    

   Even if the CRA reassesses the return, the worker may need to submit a request to reassess their return to correct amounts entered on any other line of the return affected by this reassessment. For example, to correct amounts claimed as employment expenses or business expenses on their previously filed return.

   Common lines of the return affected by a reassessment

   When a reassessment is issued, the following are the most common lines of the income tax and benefit return that may be affected:

   Line 10100 – Employment income

   This line reports the total employment income from the T4 slips received by the worker. If adjustments are made to box 14, Employment income, of the T4 slip, the amount reported on this line will be updated accordingly.

   Line 10400 – Other employment income

   This line reports amounts usually included on a T4A or T4PS slip. If other sources of employment income that should have been included on a T4 slip were originally reported on this line by the worker, those amounts will be removed from this line.

   Line 15000 – Total income

   This line reports the total income reported on the tax return. If adjustments are made to the employment income or other sources of income, the amount reported on this line will be updated accordingly.

   Line 22215 – Deductions for CPP enhanced contributions on employment income

   This line reports the deductions for CPP enhanced contributions. If errors were made in calculating CPP enhanced contributions, the amount reported on this line will be corrected accordingly.

   Line 23600 – Net income

   This line reports the net income after deductions. If adjustments are made to the total income (from Line 15000) or to deductions, the amount reported on this line will be updated accordingly.

   Line 26000 – Taxable income

   This line reports the amount used to calculate the federal tax on the return provincial and territorial tax on Form 428 (except Quebec). If adjustments are made to the total income (from Line 15000), the amount reported on this line will be updated accordingly.

   Line 30000 – Basic personal amount (federal tax credit)

   This line reports the tax credit for the basic personal amount. If adjustments are made to net income, the amount reported on this line will be updated accordingly.

   Line 30800 – Base CPP contributions through employment income

   This line reports base CPP contributions. If there were errors in calculating the CPP contributions (for example, due to an incorrect determination of employment status or incorrect income reporting), the amount reported on this line will be updated accordingly.

   Line 31200 – EI premiums through employment

   This line reports EI premiums. If there were errors in calculating the EI premiums (for example, due to an incorrect determination of employment status or incorrect income reporting), the amount reported on this line will be updated accordingly.

   Line 42000 – Net federal tax

   If adjustments are made to the taxable income, the amount of net federal tax will be updated accordingly. Any reassessment will also result in an update on this line.

   Line 42800 – Provincial or territorial tax

   This line reports provincial or territorial tax. If adjustments are made to income or deductions, the amount reported on this line may be updated accordingly, depending on the province or territory.

   Lines 48400 and 48500 – Refund or balance owing

   After the reassessment, this line reports either a refund or a balance owing based on the adjustments to the income tax and benefit return and to taxes paid.

   Learn more:

   • Employment expenses and credits
   • Business expenses

   If the worker receives an additional or amended slip from their employer or a payer, the worker must determine if:

   • The CRA reassessed their return
   • They must submit a request to reassess their previously filed return

   Confirm whether the CRA has reassessed the worker’s return

   To confirm whether the CRA has reassessed the previously filed return, the worker can view the status of their return and access the notice of reassessment (NOR) using the CRA online services in My Account by selecting “Tax returns” in the navigation menu.

   The “Tax returns and notices of assessment and reassessment” table provides general information about the tax returns. More detailed information is available when selecting the links under the “Status” and “Notice of Assessment or Reassessment” columns.

   If the “Status” column shows “Reassessed,” the worker should review the notice to make sure the adjusted amounts match the changes made on the slips received from the employer or payer.

    

   The CRA recommends waiting 60 days after the employer or payer has distributed the additional or amended T4 or T4A slips to the worker before submitting a request for reassessment. This helps ensure that the CRA does not already have a reassessment in progress.

        CRA sign-in     

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   • CRA reassesses the return

     If the worker’s return was reassessed by the CRA, the worker will have received a NOR.

     If applicable, the NOR provides a summary of the balance owing, including any previous arrears balance and any penalties or interest applied to overdue amounts.

   • Worker submits a request to reassess their return

     If the CRA did not reassess the worker’s return, the worker must submit a request to reassess their return using the additional or amended slip received from the employer or payer.

     Learn more on how the worker can submit a request to reassess their return: Changing a tax return

   Learn more on how the worker can understand their notices: Notices of assessment – NOA or NOR