Overpayment and recovering of EI premiums and CPP contributions

What does an employer do if over deductions are discovered?

If an employer discovers during the preparation of the T4 slips that they have over deducted EI premiums or CPP contributions from one of its employees, the employer should include the overpayment on the employee’s T4 slip and show the correct insurable and pensionable earnings in boxes 16 and 18.  Likewise, if the amount collected was less than the correct amount, the T4 slips should be issued as if the correct amount was collected and the employer should remit the correct amount (both employee and employer contributions) to CRA.

The employer can recover their overpayment fromto the CRA if the amount was included on the employee’s T4 slip by submitting Form PD24, Application for a Refund of Overdeducted CPP Contributions or EI premiums. This request should be made no later than three years for EI premiums and four years for CPP contributions from the year end in which the overpayment occurred.

Example 1: EI Over Deducted

ABC Corp in 2014 deducted $940 EI premiums from Tammy Smith whose insurable earnings were $48,600. The correct EI premium amount was $913.68. This error was discovered after ABC Corp submitted the T4 slips to Tammy and CRA. The overpayment and the correct insurable earnings were recorded on Tammy’s T4 slip. ABC Corp can submit a PD24 to CRA to recover the employer’s EI premium overpayment. When Tammy files her tax return for 2014 she will recover her overpayment of EI premium.

Example 2: CPP Under Deducted

In 2014, AJ Corp deducted $2,206.00 from John Allen’s salary for his CPP contribution. John’s pensionable earnings were $52,500.00. The maximum pensionable earnings for 2014 were $52,500 and the corresponding CPP employee contribution was $2,425.50. Therefore, AJ Corp under deducted CPP contribution from John’s salary by $219.50. This error was found before the filing of the T4 slips and summary to CRA. AJ Corp will show the correct amount on the T4 slip and summary and should send  a cheque for the amount of $439.00 ($219.50 x 2)  to CRA which represents the short collection of the CPP contribution of the employee and the employer’s portion.

If John is still working for AJ Corp when the error is found, AJ Corp may recover the under deducted CPP contributions from John through payroll deduction. When the employee’s short collection of CPP contribution is recovered itthis should not be included on John’s T4 slip in 2015 since the correct amount was already included on the employee’s T4 slip for 2014.

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