Payroll year-end guide Canada 2025: What employers need to do

Closing out payroll at the end of the year is one of the most important responsibilities for Canadian employers. It’s not just about ticking boxes — payroll year-end is where you reconcile every dollar paid, confirm CPP and EI contributions, issue T4s and T4As and prepare for the Canada Revenue Agency’s strict deadlines. Miss a step, and you risk penalties, amended filings or frustrated employees waiting for the slips they need to file their own taxes.

The good news? With the right preparation, payroll year-end doesn’t have to be stressful. This payroll year-end guide for Canada 2025 walks employers through the process step by step — from reviewing employee and contractor data, to balancing accounts, to planning ahead for 2026 updates. Whether you’re running payroll for a small team or a growing SMB, this guide will help you stay compliant, keep your records accurate and head into the new year with confidence.

Canadian small business year-end payroll preparation

For small and medium-sized employers, year-end payroll can feel overwhelming — but breaking it into a timeline makes it manageable. Think of payroll year-end as a series of checkpoints rather than a single deadline. Starting early means fewer surprises and smoother filing.

Here’s a simple preparation roadmap:

November 2025

• Review employee and contractor information (SINs, addresses, contracts).
• Start reconciling the CPP and EI balances for the year
• Verify your CRA business and payroll program account details.

December 2025

• Process final pay runs, bonuses and taxable benefits. Don’t leave it too late – if there are adjustments that impact employees, try to spread these out across multiple pay periods.
• Make sure all remittances are up to date before year-end.
• Double-check that your payroll software reflects the latest CRA updates (If you’re wondering how automation can make this easier, here’s how payroll software works).

January–February 2026

• Generate T4 and T4A slips and reconcile them with your CRA accounts.
• Prepare and submit summaries to the CRA.
• Distribute slips to employees and contractors no later than 28 February 2026.

By mapping out tasks across these months, SMBs can avoid last-minute rushes and reduce the risk of errors. A checklist or mini calendar — tailored to your business — is one of the simplest tools to keep payroll year-end under control.

Year-end processing prerequisites

Before you dive into reconciliations and slip generation, make sure the groundwork is in place. Year-end payroll runs much smoother when your systems and records are clean and current. At minimum, employers should:

• Update payroll accounts. Confirm that every 2025 pay run has been processed, including off-cycle payments, commissions and bonuses. If you’re unsure about correct tax deductions on these payments, review our guide on calculating payroll deductions in Canada.
• Check your payroll software. Make sure you’re on the latest version, with all CRA compliance updates installed. If you’re considering automation to ease this process, read more about how payroll software works.
• Finalize employee records. Update resignations, new hires or job status changes.
• Verify staff contact details. Confirm that email and home addresses are correct. This ensures slips go to the right place and direct deposits run without delay.

By taking care of these prerequisites early, you’ll avoid unnecessary bottlenecks once it’s time to reconcile accounts and prepare official CRA filings.

Business information verification

Year-end payroll isn’t only about employee data — your business records matter just as much. The CRA requires accurate employer information on every filing, and small errors can cause processing delays or rejected submissions.

Before moving forward, confirm that your business information is correct and up to date:

• Business Number (BN): Ensure your BN is valid and that your payroll program account is linked correctly to your CRA file.
• Remittance accounts: Check that your payroll deductions account is active and reconciled with CRA remittances throughout the year. A mismatch here can throw off your T4 and summary totals.
• Legal name and addresses: Verify that the business name and mailing address listed with the CRA match what appears on your filings. If you operate in Québec, make sure your payroll compliance practices reflect provincial reporting requirements.
• Banking details: Review the account used for remittances and refunds. Outdated or incorrect bank information could lead to missed payments or refund delays.

Getting these details right now saves time later — and keeps you focused on preparing slips and summaries instead of chasing CRA corrections.

Employee and contractor data validation

Accurate employee and contractor records are the foundation of payroll year-end. Even small mistakes — like a mistyped SIN or outdated address — can cause T4s or T4As to be rejected, delaying employees’ tax filings and creating extra admin for your business.

Before generating slips, take time to review and confirm the following:

• Social Insurance Numbers (SINs): All employees and contractors must have a valid Social Insurance Number (SIN) recorded in our system. The SIN must exactly match the number shown on the individual’s government-issued SIN document — including all digits and formatting.

If an employee or contractor receives a new SIN, their record must be updated immediately.

Example:
Temporary residents (e.g., foreign workers or international students) are often issued a SIN that begins with “9.”
When they become permanent residents or citizens, they are given a new SIN.
In these cases, the old “9-series” SIN should be replaced with the new one in all records and payroll systems.

• Contact information: Update physical mailing and email addresses, especially if staff moved provinces in 2025. Incorrect addresses can impact tax withholdings and create confusion when slips are mailed.
• Contract details: Confirm employment status (full-time, part-time, temporary or contractor). Misclassification can lead to CRA penalties. If you need clarity on the difference, revisit our blog on best practices to conquer Canadian payroll.
• Benefits and allowances: All taxable benefits and allowances — including health premiums, car or housing allowances, and other employer-paid items — must be accurately reported on employees’ T4 slips.

Employers must also include the T4 dental code in Box 45, indicating whether the employee had employer-provided dental coverage during the year.

• Time off balances: Check unused vacation payouts or carryovers. Any payouts in 2025 should be reflected in year-to-date totals.

For contractors, ensure names, addresses and amounts paid are correct. These details flow directly into T4A slips and errors here can lead to amended filings.

By validating employee and contractor data early, you’ll avoid one of the most common year-end payroll pitfalls — inaccurate or incomplete slips.

Year-to-date amount confirmation

Before you start preparing slips, it’s essential to make sure your payroll data aligns with your accounting records. This reconciliation step ensures employees’ T4s reflect accurate amounts — and it helps you avoid issuing amended slips later.

Here’s what to review:

• Gross pay: Confirm that base wages, overtime, bonuses and commissions recorded in payroll match your general ledger.
• Taxable benefits and allowances: Check that all applicable benefits — such as group insurance, housing allowances or company car usage — are included. Missing a taxable benefit is one of the most common year-end errors.
• Income tax deductions: Verify that the federal and provincial tax withheld from employees matches what was remitted to the CRA.
• CPP/QPP and EI contributions: Ensure that both employee and employer contribution amounts for Canada Pension Plan (CPP) / Québec Pension Plan (QPP) and Employment Insurance (EI) are accurate and within statutory limits.

All contribution discrepancies — whether over-contributions or under-contributions — must be identified and corrected before running the final payroll of the year.

If an error is discovered after the final payroll has been processed, you must:

1. Amend the employee’s T4 slip to reflect the corrected contribution amounts; and
2. Submit any deficiency payments directly to the Canada Revenue Agency (CRA) (or Revenu Québec, if applicable).

If you’re unsure how to verify calculations, review our step-by-step guide to calculating payroll deductions in Canada.

Reconciling year-to-date amounts early not only prevents compliance issues but also builds employee trust by guaranteeing their records are accurate when tax season arrives.

Payroll bank account reconciliation

Reconciling your payroll bank account ensures that every payment recorded in your system matches the money that actually moved through your accounts. This step gives you confidence that wages, benefits and remittances are all accounted for before you close out 2025.

For SMBs handling multiple payroll cycles or larger teams, automating reconciliation can save time and reduce manual errors. Modern platforms can automatically match payroll runs against bank transactions — see our breakdown of how payroll software works for details.

Payroll tax account balance verification

Reconciling your CRA payroll accounts is one of the most important year-end steps. Every CPP/QPP, EI and income tax deduction you’ve withheld must match what’s been remitted throughout the year. If the balances don’t line up, your T4 and summary filings will be off.

Follow this three-step process:

1. Pull CRA statements

Log into your CRA My Business Account and download payroll account statements for 2025. These show every remittance received and applied by the CRA.

2. Compare to your payroll system

Cross-check CRA records against your payroll ledger. Look for mismatches — such as amounts recorded internally but not showing on CRA statements, or vice versa.

3. Resolve discrepancies

• Underpayments: Submit the missing remittance right away.
  
• Overpayments: Contact the CRA to request a credit or refund.
  
• Timing gaps: Confirm whether late remittances were applied to the correct period.

By reconciling balances now, you’ll ensure your year-end slips and summaries align perfectly with CRA records. For a deeper dive into how to calculate and cross-check deductions correctly throughout the year, see our guide on payroll deductions in Canada.

CPP and EI amount review and outstanding remittances

Year-end is the time to confirm that every Canada Pension Plan (CPP/QPP) and Employment Insurance (EI) contribution is accurate — for both employers and employees. These contributions are capped annually, so over- or under-contributing can cause headaches for everyone at tax time.

CPP/QPP thresholds

Check the annual maximum pensionable earnings and contribution limits set for 2025. Make sure no employee has exceeded the maximum, and correct any overages in your payroll records.

EI premiums

Verify that premiums withheld from employees — and the employer’s share — do not exceed the annual maximum. Overpayments need to be identified now, not after slips are filed.

Outstanding balances

If your reconciliation shows any shortfall, remit the missing amounts to the CRA before filing T4s. This avoids penalties and prevents mismatches in CRA records.

Software support

Modern payroll platforms can automatically apply CPP/EI thresholds and flag discrepancies before they snowball into bigger issues. If you’re not already using automation, here’s more on how payroll software works.

Year-end form and summary review

Canadian employers must prepare and distribute specific slips and summaries at year’s end. Each document serves a different purpose, and accuracy is essential — both for employees filing their taxes and for CRA compliance.

If you employ staff in Québec, you may also need to file Relevé 1 slips with Revenu Québec, in addition to federal T4s. Check the provincial rules in our guide to payroll compliance in Québec. 

Generating these forms manually is time-consuming, especially for SMBs with a mix of employees and contractors. Payroll software can automatically pull year-to-date amounts into T4 and T4A forms, reducing errors and filing stress. 

Next year planning and setup

While the year end process is set in motion, we need to temporarily shift attention to the new year so the first pay of 2026 is correct and paid on time. Preparing now means you’ll start the new year on solid footing and avoid scrambling to adjust mid-cycle. Key tasks include:

• Set your payroll schedule. Map out all 2026 pay dates, including holiday shifts, to prevent late payments.
• Update tax tables and thresholds. CPP/QPP and standard EI rates update automatically, but clients with a reduced EI rate must update it manually in eOS. Review the new rates and preview the first 2026 payroll to confirm accuracy.
• Review benefit and allowance classifications. Make sure taxable vs. non-taxable benefits are correctly set up so they report properly next year.
• Revisit payroll processes. Consider whether manual steps could be automated — our blog on best practices to conquer Canadian payroll has useful strategies for SMBs.
• Train your team. Brief payroll administrators on system updates, new compliance requirements and any process changes.
• Carry forward balance: Review and carry forward any applicable balances, such as vacation accruals, sick leave, deduction balances, or other year-end amounts. Ensure YTD totals are reset correctly for the new payroll year.
• Update TD1 and TP-1015.3-V forms: Download the updated 2026 TD1 and TP-1015.3-V forms from the CRA and Revenu Québec. Employers only need to provide new forms to employees claiming amounts other than the basic personal amount. Once any new forms are submitted, update those employees’ details in your payroll system.

Starting the year with updated systems and clear processes ensures you’re ready for CRA requirements, employee expectations and the unexpected surprises that every payroll year brings.

Streamlined year-end processing solutions

Managing payroll year-end manually can be stressful and error-prone. That’s why many Canadian SMBs are turning to automation and outsourcing to take the complexity out of compliance. Modern payroll solutions can help you:

1. Automate calculations

CPP, EI and income tax deductions are applied automatically, with thresholds updated each year. This reduces the risk of over- or under-contributing.

2. Generate slips and summaries

T4 and T4A forms can be produced directly from payroll data, saving hours of manual entry and cutting down on errors.

3. Reconcile in real time

Transactions and remittances can be matched instantly, so you spot discrepancies before they become filing issues.

4. File electronically with the CRA

Skip the paper forms and submit year-end returns securely online. Faster, more accurate and less admin for your team.

5. Free up resources

With automation or outsourced payroll support, your team can spend less time on compliance tasks and more time focusing on growing the business.

If you’re ready to simplify your year-end, Employment Hero Payroll Software gives SMBs the tools to stay compliant and stress-free — from automated deductions to ready-to-file slips.

Common year-end payroll mistakes to avoid 

Even experienced employers can slip up at payroll year-end. Knowing the most common errors helps you spot and prevent them before they become costly corrections.

By tackling these pitfalls early, SMBs can avoid amended filings, CRA penalties and unnecessary stress for both employers and employees.

Deadlines Canadian employers must know 

The CRA sets strict deadlines for payroll year-end. Missing these dates can result in penalties — up to $100 per slip, capped at $7,500. Keep these 2026 deadlines front of mind:

January 2026

• Final 2025 payroll remittances must be submitted (exact date depends on your remitter type: regular or quarterly).
• Review your CRA payroll account to confirm all 2025 contributions have been received.

February 2026

• 28 February 2026: Deadline to issue T4 slips to employees and T4A slips to contractors.
• 28 February 2026: Deadline to file T4/T4A summaries with the CRA.

Ongoing

• Employers in Québec may also have provincial filing requirements (such as Relevé 1) with Revenu Québec. Check the payroll compliance guide for Québec for those details.

Marking these dates in your payroll calendar now ensures you won’t be caught off guard as year-end approaches.

Wrapping Up Your Year-End with Confidence

Year-end payroll doesn’t have to be stressful. With the right preparation, accurate data and a clear checklist, you can close out the year smoothly and start the new one on solid footing. Employment Hero helps you automate calculations, file reports on time and stay on top of every CRA requirement — so you can focus on planning for what’s next, not fixing what’s past. See how Employment Hero Payroll could handle the hard stuff, so you can focus on growing your business and celebrating your wins.