The CRA updated the T4127 payroll deduction formulas effective July 1, 2023, requiring Ontario shop owners to adjust payroll systems for the second CPP contribution starting January 2024. This change means your payroll software must now calculate the second CPP deduction on earnings up to the new ceiling, as outlined in the updated T4127 guide. You’ll need to verify these calculations before January 2024 to avoid CRA penalties for unremitted deductions.
Appendix 2 of the guide includes examples to test your payroll system’s accuracy ahead of implementation. You can see exactly how the new formulas work using the provided examples, trace every deduction, and confirm your remittance is CRA-compliant (T4127) without relying on a "black box." This allows you to check it yourself and ensure your payroll matches the CRA’s requirements for the second CPP contribution.