What if I make a clerical,
administrative, or system
error resulting in a salary
overpayment? On April 6, 2020,
CRA released the updated guide
RC4120 Employers’ Guide –
Filing the T4 slip and
Summary providing detailed
instructions on these such
The employer may elect to have the employee repay the
net amount (gross amount less CPP, EI and income tax
withheld) overpaid due to the error, provided they meet the
– no later than three years after the end of the year in
which the salary was overpaid
o the employer made the election in the
prescribed manner (see below),
o the employee repaid or arranged to repay the
net amount of the overpayment;
– the employer did not issue a T4 slip with the
employee’s correct earnings (that is, with the salary
overpayment removed); and
– the employer’s business is actively operating.
This election would reduce the cashflow burden the
employee would otherwise bear.
The election is made by either excluding the salary
overpayment from an original T4 slip or amending a T4 slip
to remove the overpayment and reducing the corresponding
income tax deducted, along with CPP and EI withheld and
Repayment after the T4 is issued
If the employee repays or arranges to repay after the
original T4 is issued, the employer must amend the T4 slip
appropriately, including any relevant CPP and EI
After CRA receives and processes the amended T4, it will
credit the income tax, CPP and EI remitted on the salary
overpayment made in error (including the employer’s share
of CPP contributions and EI premiums) to the employer’s
payroll program account. The employer can then reduce
the next payroll remittance by the credited amount.
Finally, CRA also provided guidance and examples for
situations in which the employer does not elect to have the
net amount repaid, and the gross amount is repaid instead.
ACTION ITEM: Over the course of the COVID-19
pandemic, many adjustments have been made to payroll
for businesses. If a T4 correction or wage adjustment is
required, consult with the detailed guidance in
publication RC4120, or reach out for assistance.
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