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Avoid PIERs from the CRA by Adjusting CPP & EI Under-Remittances

During tax season, no one knows the pains of responding to Pensionable & Insurable Earnings Reviews (PIERs) from the Canada Revenue Agency more than our valued users. As your payroll partner, we've developed a tool to help you correct any deficiencies in your CPP & EI Remittances, enabling you to avoid the time-consuming process of dealing with PIERs

It is important to note that this tool is built only to address under-remittances/deficiencies of CPP & EI. Over-payments may not be adjusted using this tool. If none of the employees in a paygroup have under-remitted CPP contributions or EI premiums, adjustments will not be enabled.

How to use the tool
Important Note: Please ensure that you do not process E.I. adjustments for owners who are exempt from paying into employment insurance and that you do not process CPP for employees under 18 or above 65 years of age. Employees who turn 18 or 65 years of age this year will require manual calculation and adjustment.

Step 1: Run the CPP & EI Deficiency Adjustment Tool located on the Run Payroll screen and the Payroll Reports Screen.

Step 2: Select the paygroup for which you intend to adjust.

Step 3: Set the pay date, pay start, and pay end date for the adjustment. If you have any payrolls being processed, ensure the pay date is set ahead of the payment date for any pending pay runs.

Step 4: Verify the under-remittance amounts that you would like to be adjusted.

  • The table will calculate an estimated CPP and EI under-remittance.
  • For any employee with an under-remittance detected, the system allows the user to edit the amount of the adjustment.
  • Employees for whom the system has not detected under-remittances will be ignored in the adjustment since this tool does not support over-remittances.
  • The employer portions columns will auto-update with any edits to the employee CPP & EI under-remittance columns.
  • If the system detects no under-remittances for any of the employees in the paygroup, the "Cancel" and "Review" buttons will not be presented as no under-remittances adjustments are required.

Step 5: Review and confirm the adjustment amounts. Knit will remit both employee and employer amount to the CRA for this adjustment.

Step 6: Avoid PIERs!

Step 7: For your records, all of the usual reports you receive when running payroll will be produced for the adjustment. Your employees will also receive paystubs with their updated YTD CPP & EI amounts on the selected pay date of the adjustment.

 

Calculations Explained

Note: the calculated under-remittances are estimates, you are responsible for requesting the correct amount.

CPP Under-Remittance Estimate

The CPP under-remittance estimate is calculated by subtracting an estimated pro-rated CPP amount (using the CRA calculations) from the YTD CPP per employee.

Discretion Advised: The calculated estimates are not intended for employees who have turned 18 or 70 years old; have been terminated or hired during the year; or are exempt from CPP and EI. The tool lists these employees and your discretion is advised in verifying the correct adjustment amount. If you would like to exempt them from the adjustment, edit the deficiency amount to "0".

Below is a breakdown of how we estimated the CPP contributions the CRA expects to have collected:

YTD Pensionable Earnings (Up to the CRA maximum amount)

(a)

Basic Exemption amount

$3,500

Periods elapsed/ Total # of pay periods

Periods Elapsed/Total # of pay periods per year = (b)

Pro-rated basic exemption amount

$3,500 x (b) = (c)

Total Pensionable Earnings

(a) - (c) = (d)

CPP Contribution Rate

0.0495

Estimated Required Contribution (2018 maximum of $2,593.80)

(d) x 0.0495 = (e)

YTD CPP Contributed

(f)

CPP Under-Remittance

(f) - (e) = (g)

 

EI Under-Remittance Estimate

The EI under-remittance estimate is calculated by subtracting an estimated EI amount (using CRA calculations) from the YTD EI contributions.

Below is the breakdown of how we estimate the EI Premiums the CRA expects to have collected:

YTD Insurable Earnings (Up to the CRA maximum amount)

(a)

EI Contribution Rate

0.0166

Estimated Required Contribution (2018 maximum of $858.22)

(a) x 0.0166 = (c)

YTD EI Contributed

(d)

EI Under-Remittance

(d) - (c) = (e)

 

How the Transactions are Processed

The employer must remit additional funds to the CRA to make up for the employee & employer portions of the deficiencies in CPP and EI remittances. The transaction will consist of a simple withdrawal of funds from the company account, which will be remitted to the CRA at the next remittance date (according to the company's remittance schedule).

Here is an example:

John Doe's contributions to CPP were under-remitted by $50 and his EI premiums were under-remitted by $10.

His employer - Example Company - would process the following transaction to correct the CPP and EI deficiencies:

 

Employee YTD CPP Contributions

Employer YTD CPP Contributions

Employee YTD EI Premiums

Employer YTD EI Premiums

Additional Funds withdrawn and remitted to the CRA

+$50

+$50

+$10

+$14 ($10 x 1.4)

$124 ($50 + $50 + $10 + $14)

 

Recovering the employee portion of the adjustment

The employer is solely responsible for recovering any additional funds remitted to the CRA using this tool.

We recommend following the CRA's guidelines on recovering the employee portions of the adjustment - linked below:

Employment Standards

Employment standards provide guidelines on how-to deduct additional funds from an employee's wages. Please comply with your local laws when deducting any CPP & EI under-remittances.

For your reference:

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