Book Consultation

Gondaliya CPA

Gondaliya CPA Professional Corporation logo
100% Canadian Owned badge
Menu
Payroll Guide  ·  Updated 2026

T4 Slip Explained: What You Need to Know

The T4 is the slip that tells the CRA what you paid your employees and what you withheld, and it is the slip the CRA checks automatically against your remittances every single year. This guide covers every box, which benefits are taxable, the February deadline, PIER assessments, the T4 vs T4A vs T5 distinction and what errors actually cost.

Book Free Payroll ConsultationPayroll Services

What a T4 Is, and Why the CRA Checks It Automatically

A T4, formally the Statement of Remuneration Paid, reports the employment income you paid an employee during a calendar year and the CPP, EI and income tax you withheld from it. The employee uses it to file their personal return. The CRA uses it for something else entirely: matching.

This is what makes the T4 different from most forms you file. It is not read once and filed away. It is fed into an automated reconciliation. The CRA compares the CPP and EI you reported on the slips against what should have been withheld given the earnings you reported, and it compares your Box 22 tax totals against what you actually remitted during the year. When those do not agree, the system produces an assessment without a human ever looking at your file. That process is called PIER, and it is covered in detail below.

The practical consequence is that T4 errors do not stay hidden. A payroll setup mistake made in January is reported on the T4 in February of the following year, matched automatically, and assessed, usually with both the employee and employer shares charged to you, plus penalties and interest, at a point where you can no longer recover the employee portion from someone who left months ago.

The Calendar-Year Trap: The T4 covers the calendar year and is due the last day of February, regardless of your corporation's fiscal year-end. Owner-managers with a June or September year-end routinely treat T4s as a year-end task and miss February entirely. Your T2 deadline and your T4 deadline have nothing to do with each other.

Who Must Issue a T4, and Which Slip Applies

The T4 obligation follows the employment relationship and the act of withholding. If you deducted CPP, EI or income tax from a payment, a T4 follows, regardless of the amount or how briefly the person worked.

T4

Employment Income

Salary, wages, commissions, bonuses, vacation pay, tips you controlled, taxable benefits. Issued where an employer-employee relationship exists.

Includes owner-managers paying themselves a salary. Due the last day of February.

T4A

Other Income

Self-employed commissions, fees for services, pension income and certain other payments where no employment relationship exists.

Issuing a T4A where a T4 was required is a worker classification error with expensive consequences.

T5

Investment Income

Dividends paid by your corporation to shareholders. An owner-manager taking dividends receives a T5, not a T4.

Also due the last day of February. Owner-managers using salary and dividends need both slips.

FeatureT4T4AT5
What it reportsEmployment incomeFees for services, pension and other incomeInvestment income, including dividends
RelationshipEmployer and employeePayer and self-employed person or pensionerCorporation and shareholder
CPP withheldYesNoNo
EI withheldYes, unless exemptNoNo
Income tax withheldYesGenerally noNo
Payroll account requiredYesYes, for filing the slipNo
Owner-manager taking salaryThis slipNoNo
Owner-manager taking dividendsNoNoThis slip
DeadlineLast day of FebruaryLast day of FebruaryLast day of February
Builds RRSP roomYesDepends on the income typeNo
Counts toward CPPYesNoNo

Salary vs Dividends Is Not Just a Tax Question: The slip that follows your compensation choice carries consequences beyond the immediate tax bill. Salary produces a T4, requires a payroll account and remittances, and builds both RRSP room and CPP entitlement. Dividends produce a T5, require no payroll account, and build neither. The right mix depends on your situation, and it should be decided before the year starts, not at T4 time.

SituationSlip RequiredNotes
Employee paid salary or wagesT4Any amount where CPP, EI or tax was withheld.
Owner-manager paying themselves salaryT4Source deductions and remittances required, same as any employee.
Owner-manager taking dividends onlyT5No T4. No CPP, no EI, no payroll account needed for dividends.
Owner-manager taking salary and dividendsT4 and T5Both slips, both due the last day of February.
Employee who worked two weeks and leftT4Duration and amount are irrelevant if you withheld.
Employee paid a bonus onlyT4Bonuses are employment income.
Genuine independent contractorT4A (fees for services)No CPP or EI withheld. The classification must be defensible.
Worker treated as a contractor but actually an employeeT4, and a problemCRA can assess unremitted CPP and EI, both shares, plus penalties and interest.
Employee receiving only non-taxable allowancesDependsIf nothing was withheld and no taxable income was paid, no T4. Confirm the allowance is genuinely non-taxable.

Box-by-Box: What Goes Where on the T4

Most T4 boxes are mechanical. A handful carry real risk, and they are the ones the CRA matches automatically. Those are highlighted below.

BoxWhat It ReportsNotes and Common Errors
Box 14: Employment incomeTotal gross employment income before deductionsIncludes salary, wages, bonuses, commissions, vacation pay, tips you controlled and the taxable benefits from Box 40. Understating Box 14 by omitting benefits is the most common T4 error.
Box 10: Province of employmentWhere the employee reported to workDrives the provincial tax calculation. Remote employees are a recurring problem, so please confirm the correct province.
Box 12: Social Insurance NumberEmployee SINA wrong SIN means the slip does not match to the employee. The CRA penalises failure to make a reasonable effort to obtain it.
Box 16: Employee's CPP contributionsCPP withheld from the employee (Box 17 is QPP)Employee share only. Capped at the annual maximum. Matched by PIER against Box 26.
Box 18: Employee's EI premiumsEI withheld from the employeeEmployee share only. Capped at the annual maximum. Matched by PIER against Box 24.
Box 22: Income tax deductedFederal and provincial tax withheld, combinedMust reconcile to your remittances via the T4 Summary.
Box 24: EI insurable earningsEarnings on which EI was payableNot the same as Box 14. Capped at the annual maximum. Leaving it blank when it differs from Box 14 triggers review.
Box 26: CPP/QPP pensionable earningsEarnings on which CPP was payableNot the same as Box 14. Capped at the annual maximum. Same blank-box problem as Box 24.
Box 28: Exempt (CPP/QPP, EI, PPIP)Exemption indicatorsTicked where employment was not pensionable or not insurable. Owner-managers controlling more than 40% of voting shares are generally not EI-insurable.
Box 29: Employment codeCode for specific employment situationsOnly used in defined circumstances. Leave blank if none applies.
Box 20: RPP contributionsRegistered pension plan contributions withheldDeductible by the employee.
Box 44: Union duesUnion dues withheld at sourceBlank where the union collects directly from members.
Box 46: Charitable donationsDonations withheld at sourceOnly amounts deducted through payroll.
Box 40: Other taxable allowances and benefitsTaxable benefits totalMust also be included in Box 14. This is where the company car, parking and group life premiums land. Reporting Box 40 but omitting it from Box 14 is a classic error.
Box 50: RPP or DPSP registration numberPlan registration numberWhere applicable.
Box 52: Pension adjustmentPA for employees in a registered planAffects the employee's RRSP room.
Box 55 / 56: PPIPProvincial parental insurance plan (Quebec)Quebec employees only.

The Box 14 / Box 40 Relationship: Box 40 is a subset of Box 14, not an addition to it. Every taxable benefit reported in Box 40 must already be included in the Box 14 total. Employers who calculate benefits at year-end and drop them into Box 40 without adding them to Box 14 create an immediate mismatch, and one that also means CPP and EI were never withheld on those benefits during the year.

Taxable Benefits: The Part Employers Actually Get Wrong

Box 14 errors almost never come from salary. Salary runs through payroll and reports itself. They come from benefits: things the business paid for on the employee's behalf that never touched a pay cheque, were never flagged as a benefit, and so never had CPP or EI withheld on them.

BenefitTaxable?ReportingNotes
Personal use of a company vehicleYesBox 40 and Box 14Standby charge plus operating expense benefit. The most frequently missed T4 item.
Employer-paid parkingGenerally yesBox 40 and Box 14Limited exceptions apply. Confirm against the current employers' guide.
Group life insurance premiumsYesBox 40 and Box 14Employer-paid premiums are a taxable benefit.
Private health and dental plan premiumsGenerally no (outside Quebec)Not reportedQuebec treats this differently.
Gifts and awardsDepends on value and typeBox 40 and Box 14 where taxableThe CRA allows a non-cash threshold. Cash and near-cash are always taxable. Confirm the current threshold.
Employer RPP contributionsNoNot a Box 14 benefitAffects the pension adjustment in Box 52.
Reasonable per-kilometre allowanceNoNot reportedMust be reasonable and based on kilometres actually driven. A flat monthly car allowance is taxable.
Flat monthly car allowanceYesBox 40 and Box 14Not tied to kilometres, so it is not a reasonable allowance.
Personal travel paid by the businessYesBox 40 and Box 14Business travel is not a benefit. Personal travel is.
Cell phone and internet, business useGenerally noNot reportedPersonal-use portion may be taxable where it is significant.

Why This Compounds: A missed taxable benefit is not a single error. Because the benefit was never run through payroll, CPP and EI were never withheld on it either. When the benefit is added to Box 14 at year-end, the CPP and EI in Boxes 16 and 18 no longer support the earnings, which produces a PIER assessment on top of the understated income. One overlooked company car creates three problems.

PIER Assessments: The Automated Check You Cannot Argue With

PIER stands for Pensionable and Insurable Earnings Review. It is the CRA's automated reconciliation: given the pensionable earnings in Box 26, the system calculates what CPP should have been withheld and compares it to Box 16. Given the insurable earnings in Box 24, it calculates what EI should have been withheld and compares it to Box 18. Any shortfall is assessed.

The part employers find unfair is the allocation. The CRA assesses the employer for both the employee share and the employer share of the shortfall. You are legally entitled to recover the employee portion from the employee, but a PIER assessment arrives months after year-end, often after the person has left, and recovery is frequently impossible in practice. The shortfall becomes yours.

PIER TriggerWhat Caused ItHow to Prevent It
CPP shortfallWrong CPP rate, or the basic exemption applied to the wrong number of pay periodsVerify rates at each January payroll update and confirm the pay period count matches your frequency
EI shortfallWrong EI rate, or deductions stopped before the annual maximum was reachedVerify rates in January. Confirm the maximum was actually reached before deductions stopped.
Box 24 or 26 blank or inconsistent with Box 14Boxes left empty when they differ from employment incomeComplete both boxes whenever they differ from Box 14
Taxable benefit added at year-endBenefit included in Box 14 but no CPP/EI withheld on it during the yearRun benefits through payroll as they arise, not at year-end
Part-year employee CPP exemptionFull annual exemption applied to a partial yearProrate correctly by pay period
Owner-manager EI withheld in errorEI deducted where the employment was not insurableConfirm insurability and tick Box 28

PIER Is Not a Judgement Call: There is no discretion in the calculation and no auditor to persuade. If Boxes 24 and 26 say the earnings were pensionable and insurable, the system knows exactly what Boxes 16 and 18 should contain. The only defence against a PIER assessment is correct withholding during the year, which is a payroll setup question, not a February question.

What T4 Errors Actually Cost: Worked Examples

Scenario 1: Company Car Never Reported as a Benefit

A Toronto contracting company provides a truck to a foreman who uses it personally on evenings and weekends. The vehicle cost sits in the corporate accounts as an operating expense. No taxable benefit is ever calculated and nothing appears in Box 40 or Box 14.

Correct treatment: The standby charge and operating expense benefit are calculated, run through payroll as they arise so CPP and EI are withheld, and reported in Box 40 and included in Box 14.

What happens on review: The CRA identifies the personal use, adds the benefit to employment income for each affected year, and assesses the unwithheld CPP and EI, both employee and employer shares, plus penalties and interest. The employee's personal returns are also reassessed.

Result: Multi-year reassessment, CPP and EI shortfall on both shares, penalties, interest, and an employee facing their own reassessment

Scenario 2: Contractor Reclassified as an Employee

A Mississauga firm engages a worker as a contractor for three years, issuing T4As and withholding nothing. The worker uses the firm's equipment, works set hours and has no other clients. On termination, the worker applies for EI, and Service Canada questions the arrangement.

Correct treatment: The working relationship pointed to employment. A T4 was required, with CPP and EI withheld and remitted throughout.

What happens: The CRA rules the worker was an employee. It assesses the unremitted CPP and EI for the open years, both employee and employer shares, plus penalties and interest. The employee share is legally recoverable from the worker in principle and unrecoverable in practice.

Result: Multi-year CPP and EI assessment on both shares, penalties, interest, and no realistic recovery

Scenario 3: T4s Prepared Correctly Through Payroll Software

An Oakville professional corporation runs payroll through Wagepoint. Taxable benefits are recorded as they arise so CPP and EI are withheld on them during the year. Boxes 24 and 26 are populated from the payroll data. Slips and the T4 Summary are filed electronically in early February.

What happens: The Summary reconciles to the remittances. PIER finds nothing. No assessment, no amendment, no correspondence.

Result: The T4 season that costs nothing, which is entirely a function of what happened during the year, not in February

Deadlines, Filing Methods and the T4 Summary

T4 slips must be given to employees and filed with the CRA, together with the T4 Summary, by the last day of February following the calendar year. When that date falls on a weekend, the deadline moves to the next business day.

RequirementDeadlineNotes
T4 slips to employeesLast day of FebruaryElectronic distribution permitted with employee consent.
T4 slips and T4 Summary to CRALast day of FebruaryThe Summary reconciles the slips to your remittances.
Electronic filingRequired above a threshold number of slipsThe threshold has been reduced in recent years. Confirm the current number before filing on paper.
T5 slips (dividends)Last day of FebruarySame deadline. Owner-managers taking dividends need this too.
Amended T4As soon as the error is identifiedFile an amendment, not a second original.
Record retentionSix years from the end of the tax yearSupporting earnings, deduction and benefit calculations, not just the slips.

Late Penalties Start at the Deadline: The T4 late-filing penalty is based on the number of slips and the number of days late, with a minimum that applies even to a single slip, escalating with slip volume. Separate penalties apply for failing to deduct or to remit. Please confirm the current CRA penalty grid before relying on specific amounts, but the structural point does not change: there is no grace period after the last day of February.

T4s Handled as Part of Your Payroll by Gondaliya CPA

Gondaliya CPA runs your payroll, calculates taxable benefits as they arise, prepares and files your T4 slips and Summary electronically, and responds to the CRA on PIER assessments, at flat-fee pricing, for incorporated business clients across Ontario.

Frequently Asked Questions on T4 Slips

What is a T4 slip?
A T4, formally the Statement of Remuneration Paid, is the slip an employer issues to each employee reporting employment income and the deductions withheld during the calendar year. The employee uses it to file their personal tax return, and the CRA uses it to match what you reported against what they claimed. It covers the calendar year, not your corporation's fiscal year.
Who has to issue a T4?
Any employer who paid salary, wages, commissions, bonuses, vacation pay, tips you controlled, honoraria or most taxable benefits must issue a T4. You must also issue one if you deducted CPP, EI or income tax from any payment, even a small one. This applies to corporations, sole proprietors and partnerships with employees, including owner-managers paying themselves a salary.
What is the T4 deadline?
T4 slips must be given to employees and the T4 Summary filed with the CRA by the last day of February following the calendar year. When that date falls on a weekend, the deadline moves to the next business day. This is a calendar-year deadline and does not shift with your corporate year-end.
What is the penalty for filing T4s late?
The late-filing penalty is based on the number of slips and the number of days late, with a minimum penalty that applies even for a single slip. Penalties escalate with the number of slips, and separate penalties apply for failing to deduct or remit. Please confirm the current CRA penalty grid before relying on specific figures. The practical point is that the penalty starts immediately at the deadline.
Do I need to issue a T4 to myself as an owner-manager?
Yes, if you pay yourself a salary. Owner-manager salary is employment income and requires a T4, source deductions and remittances, exactly as for any other employee. If you pay yourself only dividends, you issue a T5 instead, not a T4. Many owner-managers use a combination, which means both slips.
What is the difference between a T4 and a T4A?
A T4 reports employment income where an employer-employee relationship exists. A T4A reports other income such as self-employed commissions, fees for services, pension income, and certain other payments. Misclassifying a worker and issuing a T4A when a T4 was required is one of the most expensive payroll errors, because the CRA can assess the unremitted CPP and EI plus penalties and interest.
What is the difference between a T4 and a T5?
A T4 reports salary and employment income. A T5 reports investment income including dividends paid by your corporation to shareholders. An owner-manager taking salary receives a T4; one taking dividends receives a T5. The T5 deadline is also the last day of February.
What goes in Box 14?
Box 14 reports total employment income before deductions, including salary, wages, bonuses, commissions, vacation pay, tips you controlled and the taxable benefits reported elsewhere on the slip. It is the gross figure, and most taxable benefits included in other boxes must also be included in Box 14.
What is Box 16 on a T4?
Box 16 reports the employee's CPP contributions withheld during the year (Box 17 is QPP for Quebec). It reflects only the employee's share, not your matching employer contribution. The amount is capped at the annual maximum, and over-contributions typically arise when an employee changed employers mid-year.
What is Box 18 on a T4?
Box 18 reports the employee's EI premiums withheld during the year, capped at the annual maximum. Your employer share is generally 1.4 times the employee amount and is not reported on the slip. If the employment was not EI-insurable, Box 18 is blank and Box 28 should be completed.
What is Box 22 on a T4?
Box 22 reports the income tax deducted and remitted for the employee during the year, both federal and provincial combined. It is what the employee claims as tax already paid when they file. If Box 22 does not match your remittances, the CRA will raise a PIER assessment.
What is Box 24 and how is it different from Box 14?
Box 24 reports EI insurable earnings, which is not the same as Box 14 employment income. Certain amounts included in Box 14 are not EI-insurable, and insurable earnings are capped at the annual maximum. Leaving Box 24 blank when it differs from Box 14 is a common error that triggers CRA review.
What is Box 26?
Box 26 reports CPP/QPP pensionable earnings, which again may differ from Box 14 because some amounts are not pensionable and pensionable earnings are capped at the annual maximum. Like Box 24, it should be completed whenever it differs from Box 14 or where the CRA otherwise requires it.
What is Box 28 used for?
Box 28 is used to indicate exemptions from CPP, EI or PPIP. You tick the applicable exemption when the employment was not pensionable or not insurable for the full period. A common case is an owner-manager who controls more than 40% of voting shares, whose employment is generally not EI-insurable.
What is Box 44 on a T4?
Box 44 reports union dues withheld, where you deducted them at source. The employee claims these as a deduction on their personal return. If the union collects dues directly from members rather than through payroll, Box 44 stays blank.
What is Box 40?
Box 40 reports other taxable allowances and benefits, and the total in Box 40 must also be included in Box 14. This is where most taxable benefits land, including personal use of a company vehicle, employer-paid parking, gifts and awards over the CRA threshold, and premiums for certain insurance plans.
Which employee benefits are taxable and must go on the T4?
Common taxable benefits include personal use of a company vehicle, employer-paid parking in most cases, group life insurance premiums, most gifts and awards over the CRA threshold, and personal travel. Non-taxable items generally include employer contributions to a registered pension plan, private health and dental plan premiums in most provinces, and reasonable per-kilometre allowances. Please confirm each benefit against the current CRA employers' guide.
Is a company car a taxable benefit on the T4?
Personal use of a company vehicle is a taxable benefit, made up of a standby charge and an operating expense benefit. It goes in Box 40 and must be included in Box 14. This is one of the most frequently missed T4 items and one the CRA looks for, because employers often track the vehicle cost but never calculate the benefit.
Are health and dental premiums a taxable benefit?
Employer-paid premiums for a private health services plan are generally not a taxable benefit in most provinces, so they are not reported on the T4. Quebec treats this differently. Group life insurance premiums, by contrast, are generally a taxable benefit and do go on the slip.
What is a PIER report?
A PIER (Pensionable and Insurable Earnings Review) is the CRA's automated check comparing the CPP and EI you reported on the T4 against what should have been deducted based on the earnings reported. A mismatch produces a PIER assessment for the shortfall plus penalties and interest. Both the employee and employer shares are assessed against you, even if you can no longer recover the employee portion.
What causes a PIER assessment?
The usual causes are CPP or EI deducted at the wrong rate, the basic CPP exemption applied incorrectly across pay periods, Box 24 or Box 26 left blank or reported inconsistently with Box 14, or an employee's deductions stopping before the annual maximum was reached. Most PIER assessments trace back to a payroll setup error repeated all year.
What if I made a mistake on a T4 I already filed?
You file an amended T4 slip and, where required, an amended T4 Summary. Do not file a second original. If the error affected the amounts withheld, you may also owe the shortfall plus penalties and interest. Amendments are routine, but repeated amendments on the same account attract attention.
What if I issued a T4 to someone who was actually a contractor?
That is a worker classification issue and it usually surfaces the other way around, when the CRA determines a contractor was really an employee. If you issued a T4 to a genuine contractor, you may have withheld CPP and EI that was not required. Either direction, the fix requires an amendment and a defensible position on the working relationship.
Do I have to file T4s electronically?
The CRA requires electronic filing above a threshold number of slips, and the threshold has been reduced in recent years. Filing on paper above the threshold attracts a penalty. Most employers now file electronically regardless, either through the CRA portal or directly from payroll software. Please confirm the current threshold before filing on paper.
What is the T4 Summary?
The T4 Summary is the form that totals all the T4 slips for a payroll account and reconciles them to what you remitted during the year. It is filed with the slips by the last day of February. Where the Summary does not agree with your remittances, the CRA will look for the difference.
Can payroll software issue T4s automatically?
Yes. Platforms such as Wagepoint generate T4 slips and the Summary from the payroll data already in the system and file them electronically, which removes most manual entry errors. The software still depends on your taxable benefits having been recorded correctly during the year, which is where errors originate.
How long do I have to keep T4 records?
Payroll records supporting the T4s should generally be kept for six years from the end of the tax year to which they relate. The CRA can request the underlying earnings, deduction and benefit calculations during a review, so the supporting data must be retrievable, not just the slips.
What if an employee never got their T4?
Reissue it. The employee can also view their slips through CRA My Account once you have filed. Your obligation is to make the slip available by the deadline, so a returned envelope does not discharge it. Most employers now distribute electronically with employee consent.
Do I issue a T4 for an employee who worked only part of the year?
Yes. Any employment income paid in the calendar year requires a T4, regardless of how briefly the person worked or how small the amount, if you deducted CPP, EI or tax. Part-year employees are also where CPP maximums and the basic exemption most often get applied incorrectly.
Can Gondaliya CPA prepare and file our T4s?
Yes. T4 slip preparation, taxable benefit calculations, the T4 Summary and electronic filing are part of our payroll service for incorporated business clients, along with source deductions, ROEs and CRA correspondence including PIER responses. All at flat-fee pricing. Payroll Services →

Related Payroll Guides & Services

Payroll Services

Full payroll processing, source deductions, remittances, taxable benefit calculations, T4s and year-end filing at a flat fee.

ROE Preparation

Record of Employment preparation and electronic filing within the Service Canada deadline, including reason code selection.

Bookkeeping Services

Books maintained so taxable benefits, payroll and remittances are captured correctly during the year, not reconstructed at year-end.

Stop Losing Money to PIER Assessments and Missed Benefits

Gondaliya CPA runs your payroll, files your T4s correctly and on time, and handles CRA follow-up, at flat-fee pricing.

Licensed CPA Ontario
1300+ Five-Star Reviews
30-Day Money-Back Guarantee
Flat-Fee Payroll
Book Free ConsultationPayroll Services

Google Reviews

1300+ five-star reviews from Ontario businesses trusting Gondaliya CPA with payroll, T4s and source deductions.

Scroll to Top