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How to add the allowance I paid by payment cheque to the employees to T4

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Summary

Adding the allowance paid by payment cheque.

Resolution

  1. Create new taxable payroll benefit for the allowance provided. Follow How to create a new payroll benefit.
  2. Calculate the total allowance the employee was paid for the year.
  3. Create a new paycheque for these employee that includes only the allowance paid.
  4. There may be taxes to be calculated.
  5. You need to contact your accountant regarding the impact on employees taxes.You can ignore taxes on these paycheques but the employee my be required by CRA to pay additional taxes.
  6. If the decision is to calculate the taxes, the employee can return the taxes amount calculated to the employer.
  7. Create a journal entry that will reverse the the transactions created by the payroll entry.
  8. If you cannot see the accounts in the general journal follow The account does not appear in the list in the General Journal (Miscellaneous Transactions).
  9. Print the T4 and verify that it's now showing the box 40 as allowance under T4 options.