Mistakes happen when processing payroll. Fortunately, the Canada Revenue Agency offers clear instructions for correcting over payment issues efficiently. Just remember that there are different rules you need to follow depending on the reason for over payment.
In most cases, over payment problems can be resolved when you and your employee file your taxes. You should always include the over payment amount, along with Canada Pension Plan contributions and Employment Insurance deductions, on the employee’s T4 slip even if he or she doesn’t repay you. Should your employee repay you, though, give the person a letter saying he or she repaid you, and note the reason for the over payment.
Your employee can use the letter to claim a deduction when filing his or her taxes. The CRA adjusts the employee’s CPP and EI contributions as needed. To get a refund for CPP contributions and EI premiums you might have overpaid on behalf of an employee, fill out Form PD24 and send it to the CRA. The agency credits your payroll account based on the information you provide. The CRA makes handling salary over payments fairly straightforward. You may wish to consult the agency’s website or with a payroll specialist for tips on handling large-scale over payment issues.