T4

A T4 is the Canadian year-end payroll slip that reports employment income and certain payroll deductions for the year.

It plays a role similar to the U.S. W-2, but it belongs to Canadian payroll and tax reporting. It helps connect the payroll records created throughout the year to the year-end slip the employee receives.

Why The T4 Matters

The T4 matters because it summarizes payroll information that employees need for year-end tax reporting and that employers must prepare accurately after the payroll year closes.

It helps connect:

• employment income
• source deductions
• year-end payroll reporting

If payroll records are wrong during the year, the T4 is one of the places those issues may surface.

Where It Appears In Payroll Workflow

The T4 is prepared from payroll records after year end. Payroll builds those records one pay period at a time, then uses year-end totals to produce the slip. It is not a replacement for the pay stub.

• a pay stub shows one payroll period
• a T4 summarizes the payroll year

Payroll staff may compare payroll registers, year-to-date payroll totals, and source-deduction records before issuing the slip. Employees then use the T4 when preparing taxes.

Simple Example

An employee receives regular pay stubs all year showing earnings and deductions. After year end, the employer issues a T4 summarizing that year’s employment income and relevant source-deduction information.

That makes the T4 a reporting document, not a period-by-period payroll record.

Common Confusion

The T4 is often confused with:

• a pay stub, which is tied to one payroll run
• source deductions, which are only part of the information behind the slip
• a W-2, which is the U.S. year-end wage statement rather than the Canadian one
• an ROE, which is a different Canadian payroll record used for a different purpose

Related Terms

• Withholding
• Employer Payroll Tax
• Pay Stub
• Gross Pay
• Payroll Register
• W-2
• Canada Payroll

Knowledge Check

1. Is a T4 a Canadian year-end payroll slip? Yes. That is its payroll role.
2. Does a T4 replace the need for pay stubs during the year? No. Pay stubs still explain each payroll run.
3. Is a T4 closer in purpose to a W-2 or to a direct-deposit instruction? It is closer in purpose to a W-2 because both are year-end payroll reporting documents.