How do I prepare a T4PS for an employee profit sharing plan?
For 2026 allocations, the T4PS is due March 1, 2027, on paper only. The EPSP trustee, or the employer, issues one slip per beneficiary showing dividends (boxes 24 to 32), capital gains (box 34), other employment income (box 35) and forfeitures (box 36). For a specified employee, or when unsure, also report employer contributions in box 41.
Which T4PS boxes do you fill in, and where does each one land?
The employer or the trustee of an EPSP trust issues a T4PS for amounts allocated to beneficiaries in the year, contingently or absolutely, for payments taxable under subsection 144(7), and for amounts a former beneficiary forfeited on leaving the plan canada.ca. Every box follows a fixed rule.
| Box | What goes in it | Where the employee reports it |
|---|---|---|
| 24 | Actual dividends other than eligible dividends | Not reported; use box 25 |
| 25 | Box 24 plus 15% | Lines 12000 and 12010 |
| 26 | 9.0301% of box 25 | Federal dividend tax credit |
| 30 | Actual eligible dividends | Not reported; use box 31 |
| 31 | Box 30 plus 38% | Line 12000 |
| 32 | 15.0198% of box 31 | Federal dividend tax credit |
| 34 | Net capital gains or losses (losses in brackets) | Schedule 3, line 17400 |
| 35 | Other employment income: employer amounts, reallocations, foreign dividends, 144(7) payments | Line 10400 |
| 36 | Amounts previously allocated that the person forfeited | Line 22900 |
| 37, 38, 39 | Foreign non business income, foreign capital gains, foreign tax | Form T2209 |
| 40 | Specified employee: yes, no, or leave both blank if unsure | None |
| 41 | Employer contributions allocated to a specified employee | Form RC359 |
Pairing rules catch people. Box 24 needs boxes 25 and 26, box 30 needs 31 and 32, box 37 needs boxes 35 and 39, and box 38 needs box 39 canada.ca. The CRA lists box 25 on lines 12000 and 12010 and box 31 on line 12000
canada.ca, and box 35 goes on line 10400
canada.ca.
Example: the trust allocates $1,000 of eligible dividends and $500 of other dividends to one employee. Box 31 is $1,380 and box 32 is $207.27 ($1,380 × 15.0198%). Box 25 is $575 and box 26 is $51.92 ($575 × 9.0301%). The full gross up arithmetic is on the dividend gross up page.
When is the T4PS due, and why can't you file it online?
Income Tax Regulations section 212 makes the EPSP trustee file the return, and lets the employer file it instead laws-lois.justice.gc.ca. Section 205(1) sets the date: the last day of February for the preceding calendar year
laws-lois.justice.gc.ca. A weekend or holiday due date moves to the next business day
canada.ca.
| Slips for | Last day of February | T4PS due |
|---|---|---|
| 2025 | Saturday, February 28, 2026 | Monday, March 2, 2026 |
| 2026 | Sunday, February 28, 2027 | Monday, March 1, 2027 |
| Business stops operating | n/a | 30 days after it stops |
As of October 2026, the March 1, 2027 date is the weekend rule applied to the calendar, the same reading as the T4 deadline. If the business or activity stops, the return is due within 30 days under 205(2) laws-lois.justice.gc.ca.
The CRA lists T4PS returns, with T4A-RCA, under "You must file by paper" canada.ca. The more than five slips rule that forces T4 and T4A online doesn't apply, and Web Forms won't take a T4PS. Mail the slips with Form T4PSSUM, one summary per payroll account, with totals that match the slips
canada.ca. If there is nothing to report, you don't send either form.
Each employee gets two copies of their slip by the same due date. You can send it electronically only with the employee's express consent laws-lois.justice.gc.ca.
What does box 41 trigger for a specified employee?
A specified employee deals with the employer at non arm's length, or owns 10% or more of any class of shares of the employer or a related corporation canada.ca. Tick yes or no in box 40. If you tick yes, or you aren't sure, you must also report box 41
canada.ca.
Section 207.8 defines the excess EPSP amount as the employer contributions allocated to the specified employee minus 20% of their employment income from that employer, computed without EPSP allocations and stock option benefits laws-lois.justice.gc.ca. The excess is deducted on line 22900, then taxed on line 41800 at the top combined rate for the province of residence
canada.ca.
| Province (2025 RC359) | Rate on the excess |
|---|---|
| Ontario | 53.53% |
| British Columbia | 53.5% |
| Alberta | 48% |
| Nova Scotia | 54% |
| Quebec (federal part only) | 33% |
| Non resident | 49% |
Worked example. An Ontario owner manager's son earns a $40,000 T4 salary from the family corporation, with no stock option benefit. The EPSP allocates $25,000 of employer contributions to him, so box 35 and box 41 each show $25,000. His 20% allowance is $8,000 ($40,000 × 20%). The excess is $17,000 ($25,000 less $8,000). He reports $25,000 on line 10400, deducts $17,000 on line 22900 and pays $9,100.10 on line 41800 ($17,000 × 53.53%).
The 2026 RC359 isn't out as of October 2026, so the rates above are the latest published, for 2025 canada.ca. The Minister can waive or cancel the tax where it is just and equitable
laws-lois.justice.gc.ca.
Why do owner managers use an EPSP, and where does TOSI fit?
The corporation deducts contributions paid to the trustee in the year or within 120 days after it ends laws-lois.justice.gc.ca. No CPP, EI or income tax is withheld from amounts allocated or paid to beneficiaries
canada.ca, and the CRA's payroll guide lists trustee allocations among amounts exempt from both CPP and EI
canada.ca. The trust pays no tax while an EPSP governs it, and the employee is taxed on allocations, not on later withdrawals of amounts already taxed (144(2), 144(3) and 144(6)).
That payroll saving is why 207.8 exists. It targets the family member or major shareholder whose allocation runs past 20% of their pay. An arrangement that only says payments come "out of profits" qualifies as an EPSP only if the employer elects under 144(10) laws-lois.justice.gc.ca, by registered mail to the Employer Programs Operations Section of its tax centre with a directors' resolution and a copy of the plan
canada.ca.
TOSI under section 120.4 is a separate test. Its split income definition doesn't list EPSP allocations laws-lois.justice.gc.ca, but 144(8) treats dividends the trust allocates as taxable dividends received by the employee
laws-lois.justice.gc.ca. If the trust holds shares of the family corporation, review boxes 24 and 30 against the TOSI rules as well as box 41 against RC359.
What changes for an employee in Quebec?
Quebec uses its own slip, the RL-25, filed by the trustee or by the employer on the trustee's behalf. It follows the same last day of February deadline, and more than 5 RL-25 slips must go online in XML revenuquebec.ca.
The payroll treatment differs from the federal one. An employer's payment to the trustee of a profit sharing plan is free of Quebec income tax withholding and QPIP, but it attracts QPP contributions, the health services fund contribution, the labour standards contribution and, where it applies, the WSDRF contribution at the time it is paid revenuquebec.ca. Leaving QPP off a Quebec EPSP contribution because CPP doesn't apply is the common miss.
Sources
Do I withhold CPP, EI or income tax on EPSP allocations?
No. The CRA says no CPP contributions, EI premiums or income tax are withheld from amounts allocated or paid to EPSP beneficiaries canada.ca. Outside Quebec, the employee settles the tax on the T1. In Quebec, QPP still applies to the employer's payment to the trustee.
What goes on the slip when an employee leaves the plan?
Report amounts previously allocated that the person is no longer entitled to receive in box 36, and they deduct it on line 22900 canada.ca. The deduction under 144(9) is limited to amounts already included in their income through contingent allocations
laws-lois.justice.gc.ca.
Do I report box 41 if I am not sure the employee is a specified employee?
Yes. Leave both box 40 choices blank and report box 41 anyway, so the employee can run the RC359 test canada.ca. An employee who isn't a specified employee owes no excess EPSP tax, so a box 41 figure costs them nothing.
Does the T4PS replace the T4 for that employee?
No. EPSP amounts go on the T4PS instead of the T4 canada.ca, but salary from the same employer still goes on the T4. The RC359 test needs both slips: the T4 sets the 20% allowance, the T4PS box 41 sets the contributions.
General information for the tax year shown, not advice for a specific client. Confirm the facts before you file or remit.