Taking the T4 adjustment credits

I used the T4 adjustment option as many of my clients don’t employ a person for the whole year therefore too much is deducted for CPP. CRA will show the adjustment credit as part of the account balance. I can’t figure out how to adjust the payroll liabilities in Quickbooks. The obvious solution would be to correct the balances in Quickbooks in the year the adjustments apply however this is not always possible as the T4 deadline of Feb 28 is during tax season and often we have to file the year end before we can make the adjustments or we are dealing with a bookkeeper.

Firstly - you cannot adjust the total amount taken off the employees cheques - any adjustments to CPP and EI have to be credited to the tax deducted amount. Even this, CRA auditors sometimes take issue with.

That leaves you with the company portions - you have two options:

  • adjust the amount to the shareholder’s T4 if they are getting one, or;
  • adjust them in Quickbooks using the general journal (you can’t adjust the employee cheques themselves, just the payables and expenses)