Canadian Payroll 2019 YE Update Round 2

Microsoft released a “Round 2” update for Canadian Payroll for Dynamics GP. What is a round 2 update? It’s a change that wasn’t in the first update in December! Typically we don’t see this in Canadian Payroll but the CRA made a relatively last minute change to the federal basic personal amount (BPA for short) that necessitated an update. As it turns out, the update does not address that change from the CRA but it does fix 3 other bugs.

Here’s what you need to know and do if you are a Dynamics GP Canadian Payroll user.

UPDATE: January 20/2020

For whatever reason, there was quite the miscommunication with this update. The long story short is it does not handle the new CRA Basic Personal Amount formula and there are some manual updates required to have properly calculated income tax as a result. The relevant parts of this post are marked with **UPDATE** to clarify.

If you run this install, the GP core build number doesn’t change, but the Canadian Payroll dictionary version does. If you’re not sure if you have the update or not, check the Canadian Payroll control window for the version vs. what I’ve listed below.

Documentation & Downloads

The official blog with all of the details is here. ** UPDATE ** the blog has some updates to reflect the updates I am including here.

GP 2015

GP 2016

Dynamics GP

What’s changed?

There are a total of 3 changes in this service pack: two hot fixes around CPP and EI, and one fix around upgrading. If you were on Dynamics GP 2018 or Dynamics GP (aka 18.2), there is a 4th item: it fixes an error you may have received regarding a “caerr.cnk” file (and this was specific to 18.2).

In this section, I’m going to focus only on the payroll specific fixes.

Fix #1: 2020 CPP Maximums

This one is minor (relatively speaking), and time is on your side if you can’t install this tax update right away. Without this tax update, the CPP maximum will be over the allowed amount by $0.90. For most organizations, it will be a while before employees get to this point. By my math, you’d max out on CPP contributions by the end of February if your annual net income was $350,000. Even a $150,000 net income employee doesn’t max out until sometime in May so it will affect some of your higher earners but not for a while in most cases.

Fix #2: CPP & EI Maximums for 2019 T4

This is an issue that will impact you sooner rather than later because it’s T4-related. Without this tax update, the T4 creation process incorrectly uses 2018 maximums for box 24 (EI) and box 26 (CPP). This is fixable via a SQL script if you have already run the Create T4 process. The script is available on the official blog (re-linked here) to update CPY40101.

Do I need to run this script? It depends…

  1. If you have already run the Create T4 process for 2019, you need to either run this script OR install the tax update and re-run the Create T4 process. Depending on where you are in your T4 preparation process, re-creating may not be a big deal. If you’ve made a lot of edits, I would use the script.
  2. If you have not yet run the Create T4 process, I would install the tax update and don’t worry about any script.

Regulatory change: Federal Basic Personal Amount

This is the “big” change, and it’s a significant departure in how tax credits were used in the past. New for 2020, effective Jan 1, 2020, the federal basic personal amount has changed AND if you earn more than $150,473 in a year, it’s a calculation, not a flat amount.

Long story sort of short: when the initial year end changes were announced, the 2020 Federal BPA amount was $12,298. NOW the Federal BPA is $13,229 for most people and a calculation if you earn more than $150,473. Some details can be found here in the CRA’s Q&A. Here’s a screenshot of the gist of it. It’s now a formula. For income earners between $150,473 and $214,368, the BPA will decrease until you get to the original $12,298 number.

What does this mean? ** UPDATE **

This tax update IS NOT calculating the formula for the Basic Personal Amount. After the update, the Tax Credits window will still show the old value of $12,298 for Federal. You must update that yourself – the tax update will not change that nor is there a pre-built routine to update it.

The Microsoft blog has the script to run to mass update the value for all employees at once to the default amount of $13,229. There is no quick fix for employees who fall into the $150,473 to $214,368 range. For employees who make more than $214,368, the value of the Basic Personal Amount stays the same for 2020 as it was before this update: $12,298. I am going to prepare a separate blog on how to calculate the BPA for those employees with annual net income in the middle range where a calculation is required.

What are my options?

According to Question 7 of the CRA Q&A link above, employers can use $13,229 for all individuals until their payroll systems are updated to fully implement the proposed legislation. Here’s the exact text:

Whether you’ve installed the tax update or not, you could set your employees all to a Federal BPA of $13,229 per the above Q&A, and the system will calculate tax based on that BPA amount. I tested this and can confirm the results match what the new tax amount should be, and if I used a different BPA for those earning in the middle threshold, it calculated that correctly too.

The bad news is there is NO plan to address this that I’m aware of. This will cause a challenge to employers who have employees with variable annual incomes and there will be no easy way to address this, other than updating the BPA amount in the TD1 values > Tax Credits window if and when the net income rises to the amount within the threshold above or climbs above it.

Summary

There’s a fair amount to soak in with this but the bottom line is you cannot simply install this update and assume everything is fixed. While that is unfortunate, that is the current situation with this update.

7 thoughts on “Canadian Payroll 2019 YE Update Round 2

  1. Reply
    Jerry Bierema - January 21, 2020

    Hi Jen

    Thanks, as always, for the great info. Will pass this around.

    Jerry

  2. Reply
    Alaa Ramadan - January 21, 2020

    I applied the new tax update round 2 in a test environment which has GP 2015 but the basic personal amount did not change. still showing $12,298. not sure if the new fix supposed to change it or do I need to change it manually.

    1. Jen Kuntz - January 21, 2020

      Hi Alaa, you’re correct, the BPA didn’t change but it needs to. I updated this blog last night with more info on what to do and have another blog with a calculator if you have employees that fall between $150K and $214K.

  3. Reply
    Patty Barnas, CPM - January 24, 2020

    Hi Jen.

    Excellent article!
    I struggled to understand exactly what the change was between round 1 and 2 regarding the TD1 values. So after some rigorous testing I came to the same conclusion, there is no change in round 2. The value in the control is the value the system uses regardless of the annual earnings, unless there is a value assigned to the employees card.

    From a payroll perspective, this is not just a GP issue but a change in the mindset around the whole management of the TD1 forms. In the past, unless the employee submitted a new form it was status quo year to year. This is an issue if the employee was under the $150K in the previous year and is over in the current year and the default in the payroll system is the higher value.
    Since the BPI on the new federal TD1 form is now blank and the value can be anywhere from the 12,298 to the 13,229 , I am suggesting that the employer leave the control at the 12,298 and provide the employee with a new Federal TD1 and TD1 worksheet if the employee wishes to claim the higher BPA. This will ensure the employee does not have a tax bill at the end of the year because their earnings crossed over the $150K in GP or when combining earnings from all sources. This to me, is the safest way to ensure the employee is not under taxed.

    Employees are always happier when they receive a refund then when they have to pay even a small amount that this will actually make. CRA is always happy when the employer taxes appropriately. We may not know the earnings from all sources and this is the safest way to ensure everyone is happy.

    1. Jen Kuntz - January 25, 2020

      Thanks for your comment Patty. I agree with you that it’s a change in mindset. It’s also apparently being challenged by the Canadian Payroll Association so I wouldn’t be surprised if we see the formula aspect of it be removed. IMHO that is needless complication for a very small salary range of affected staff (~75K is the window where it would be relevant).

      I would say to your comment around an employer not knowing someone’s earnings from all sources, that is not up to the employer. They must deduct the appropriate amount of taxes based on the income they are paying the employee, even if they know the employee has other income sources. The employee must fill out a TD1 for it to be otherwise. If the CRA recommends using $13,229 for all until a system can handle the formula, I’d be doing that and speaking to my employees who are in or near the range where the formula kicks in so those affected may choose to complete a TD1 for additional tax if they wish (to counteract the inability for GP to properly calculate the BPA).

  4. Reply
    Chris Skyllas - January 24, 2020

    If you were on round one and you attempted to perform a major version upgrade, you were unable to upgrade. This was fixed with round two. Got the nasty surprise when I attempted to upgrade from 2015 to 2016.

    1. Jen Kuntz - January 25, 2020

      Thanks for the comment Chris. Very true, and I skipped over this and another GP 18.2 issue in my post to focus more on the payroll issues.

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