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A
a.scott.james
February 1, 2023
Question

Retiring Allowance (severance Pay) QBO Payroll Canada

  • February 1, 2023
  • 3 replies
  • 0 views

I am attempting to pay multiple lump sum payments for loss of employment. As per CRA, the payments are Federal Income Taxable and CPP/EI Non-Taxable. QBO does NOT have such an earnings type available. Please suggest a workaround solution so that the T4 and T4 Summary will be properly stated when filed. Using an Allowance or Reimbursement are not potential solutions.

3 replies

J
JamesM4
February 1, 2023

Hi there, 

 

Thanks for reaching out to us in the Community! When it comes to managing your books, QuickBooks is the go-to program that enables you to manage your work with peace of mind. I'll be happy to share more info so you're on the right track with your work. 

 

In order to accurately record your transactions, I highly recommend consulting an accounting professional for expert advice. This ensures your books remain accurate while you continue to manage your work with peace of mind. You can also get in touch with a professional using this link here. Other accounting professionals are able to see this post in the Community and this will allow them to chime in. Otherwise, here's a helpful article that provides more info on: How to prepare T4 slips and summary. 

 

Let me know if this info helps. Otherwise, you're more than welcome to ask other questions in the comments below.

A
a.scott.jamesAuthor
February 2, 2023

That was a useless reply.

 

An earnings code that is Federal Tax 'taxable' and EI/CPP 'exempt' is needed. None is available.

 

This is a major flaw. Please address it and create such an earnings type.

A
a.scott.jamesAuthor
February 3, 2023

In efforts to find a useable solution rather than that as suggested by 'QuickBooks Team', here's what was done as a workaround.

 

Under the respective employee's Tax Withholdings, CPP and EI were flagged as exempt. This allowed the opportunity to issue the Retirement Allowance payment as CPP/EI exempt and Federal Income Tax taxable.

 

Next, it will be necessary to generate  manual T4(s) as the QB generated T4s will be incorrect. The retiring allowance (lump-sum payment) will need to be reported in Box 66 of the T4s in order for CRA can determine that a portion of the Box 14 earnings are CPP/EI exempt.

H
Hburke
January 9, 2024

This information is super helpful because I got nothing but pushback from QBO on this! My only follow up is how did you enter the actual payment amount? As regular wages or something else???

V
VK61
June 4, 2025

Here's our situation.

We have an employee who is being offered a lump sum severance, which will not be on the last day of their employment with us. So I will have to de-activate them, at which point, I will have to generate the ROE. 

Then after a week if we pay the lumpsum, how do I process this payment on QBO for an inactive employee and not deduct CPP and EI (CRA directive)?

 

My second question, how do I generate the PD7A to get the information to remit this to CRA?

 

My third question is when I generate the T4 at the end of the year, how does this get captured for that specific employee? Does this involve a different process?

 

Thanks in advance

A
a.scott.jamesAuthor
June 4, 2025

When you re-activate the employee to issue their severance, you can make them CPP+EI exempt under the Tax Withholdings in their profile. There is no way to issue a correct T4 as QBO Canada Payroll does not accommodate these earnings types. You will need to electronically file the T4 incorrectly, issue and file an amended return and await for re-assessment. In the meantime, CRA will charge you for the shortfall and you will need to apply to claim it back. It is a major nuisance that I discussed at length with QBO support and CRA and still no fix. Definitely a major flaw that will hopefully be addressed someday.

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