The Feb 28 Triple Threat: GST, Payroll, and T4

TLDR: The Quick Digest: The final day of February is the “Triple Threat” for Canadian restaurant owners, where T4/T4A filings, GST/HST remittances, and provincial WCB reports (BC and Alberta) all fall due simultaneously. Missing these can trigger severe CRA penalties, “Pensionable and Insurable Earnings Reviews” (PIER), and even personal liability for directors. To survive, smart operators must eliminate “Ghost Money”, tax funds mistakenly used for operations, by automating a Tax Holding Account and shifting to a disciplined weekly bookkeeping cadence.

Why read the full article? Tax compliance in the hospitality industry isn’t just about dates; it’s about navigating a minefield of unique risks like Controlled vs. Direct Tips and the new mandatory Canadian Dental Care Plan (CDCP) reporting in Box 45. This article deconstructs the specific “deadline cascade” that starts on February 15 and provides the exact “Accountific DNA” framework to help you “86” the paper and turn compliance into a byproduct of operational excellence.

Achieve Control with Accountific. You focus on plating the perfect dish; let us handle the calculations. Accountific specialises in moving restaurant owners “out of the weeds” and into a position of proactive financial control. Ready to insulate your business from the February cliff? Book your February Survival Consult with Accountific today and get your ducks in a row before the deadline hits.

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The “Janu-worry” Hangover and the February Cliff

The hospitality industry operates on a rhythm distinct from the standard corporate calendar. While the rest of the business world eases into the first quarter with strategic planning sessions and forecasted budgets, the Canadian restaurant owner often navigates a psychological and financial trough known colloquially as “Janu-worry“. This period follows the adrenaline-fueled highs of the December holiday rush, where dining rooms bustle with corporate parties and families celebrating the season. The subsequent crash in January consumer spending, combined with the arrival of heavy invoices for December’s premium inventory, creates a liquidity crunch that tests the resilience of even the most seasoned establishments.

However, the true test of a restaurant’s administrative fortitude does not occur in the depths of January’s sales slump. It culminates weeks later, at the end of February. For the uninitiated, February 28th appears as merely another date on the calendar. For the strategic operator, it represents a “Triple Threat” deadline; a convergence of compliance obligations that can shatter a fragile cash flow position if not managed with foresight and precision. On this single day, the Canadian food entrepreneur faces the simultaneous due dates for T4 and T4A information returns, the filing and remittance of January’s GST/HST (for monthly filers) or annual balances, and the annual payroll reporting for Workers’ Compensation boards in key provinces like British Columbia and Alberta.

This article serves as a comprehensive strategic dossier, drafted by Accountific for the Canadian food service community. It is designed to move the restaurant owner from a state of reactive panic, often described in kitchen parlance as being “in the weeds”, to a position of proactive control. We will deconstruct the regulatory architecture of the February compliance cluster, analyse the specific pitfalls inherent to the cash-based restaurant model, and propose a robust, automated financial framework. By shifting from the chaotic “shoe-box” method of receipt storage to the disciplined, weekly reconciliation process that forms the Accountific DNA, we demonstrate how compliance becomes not a burden, but a byproduct of operational excellence.

This analysis does not merely list dates and rates; it explores the causal relationships between poor data hygiene and CRA audits, the “ghost money” phenomenon that deludes owners into a false sense of solvency, and the specific technological interventions that can automate survival. We write this with the empathy of a trusted advisor who understands that your passion is plating the perfect scallop, not calculating CPP deductions. Yet, we also write with the stern clarity of a compliance expert who knows that the Canada Revenue Agency (CRA) does not accept “the brunch rush was crazy” as a valid excuse for late filing.

The Anatomy of the Triple Threat and the Deadline Cascade

The “Triple Threat” is not an isolated event but the crescendo of a deadline cascade that accelerates rapidly as February progresses. Understanding the precise chronology is critical for cash flow forecasting, as missing the early signals often compounds the severity of the final impact.

1.1 The Prelude: February 15th and the Payroll Trap

Before the major filing deadline arrives, the standard monthly payroll remittance for January acts as the first hurdle. Due on February 15th, this remittance covers the employee and employer portions of the Canada Pension Plan (CPP), Employment Insurance (EI), and income tax deducted at source. For restaurants, January payrolls can be deceptively high. The payment often includes vacation pay payouts for staff who departed after the holiday season or statutory holiday pay for New Year’s Day, which inflates the gross payroll and, consequently, the source deductions.

Failure to clear this hurdle cleanly has immediate downstream effects. A late payment on February 15th flags the business account in the CRA’s automated system. When the T4 information returns, which summarises these very remittances, are filed two weeks later, that flag may trigger a “Pensionable and Insurable Earnings Review” (PIER) sooner rather than later. The CRA’s system is designed to detect discrepancies, and a late remittance suggests administrative disarray.

1.2 The Climax: February 28th

The final day of February (or the 29th in leap years) is the critical compliance node where three distinct liability streams converge.

Liability Stream 1: Payroll Information Returns (T4 & T4A)

Employers must file the T4 Summary and individual T4 slips for all employees. Simultaneously, T4A slips must be filed for independent contractors. This is not simply a matter of printing paper. It involves a reconciliation of the entire previous calendar year’s wages, verifying that the remittances paid monthly match the totals reported on the slips. For a restaurant with high turnover, a characteristic feature of the industry, this can involve generating dozens, sometimes hundreds, of slips for employees who may have worked only a few shifts.

Liability Stream 2: GST/HST Remittance

For monthly filers, the January return is due. For annual filers with a December 31st year-end (common for sole proprietorships and partnerships) the final payment is due, even if the return filing itself has a later deadline of June 15th. This distinction between “filing due date” and “payment due date” often catches owners off guard. They assume that because they have until June to file the paperwork, they can delay the payment. This is incorrect. Interest begins accruing on the balance owing immediately after April 30th (for individuals) or two to three months post-year-end for corporations, effectively making February the practical deadline for financial readiness.

Liability Stream 3: Workers’ Compensation

The third stream flows to provincial agencies.

• WorkSafeBC: The Annual Employer’s Payroll Report (AEPR) is due February 28th. This report reconciles the estimated payroll reported at the start of the year with the actual payroll paid. If the restaurant grew and payroll exceeded estimates, a “true-up” payment is required immediately.
• WCB Alberta: The Annual Return is strictly due February 28th. Similar to BC, this involves reporting assessable earnings to determine the final premium for the prior year and the deposit for the current year.
• WSIB (Ontario): While the reconciliation deadline is technically March 31st, the data required, gross insurable earnings, is identical to the T4 data. Prudent operators prepare this reconciliation in February alongside their T4s to ensure consistency between the figures reported to the CRA and the WSIB. Discrepancies between these two reporting bodies are a common trigger for audits.

1.3 The “Ghost Money” Phenomenon

The core financial danger of the Triple Threat lies in the nature of the funds involved. GST/HST collected from customers and source deductions (CPP, EI, Tax) withheld from employees are effectively “trust funds.” They do not belong to the business. They never did.

In the high-pressure environment of a restaurant kitchen, where margins are “pencil-thin” and cash is the oxygen that keeps the fires burning, there is a pervasive temptation to view the bank balance as a single, homogenous pool of liquidity. When a supplier demands payment for a seafood delivery to keep the menu intact for Valentine’s Day, or when an unexpected refrigerator repair bill lands, owners often dip into these commingled funds.

This creates “Ghost Money”, cash that appears to be available for operations but is, in reality, a liability owed to the government. It is an illusion of solvency. When February 28th arrives, the ghost money vanishes. The government demands its trust funds, and if those funds have been spent on holiday inventory or repairs, the business faces a massive cash flow hole. Unlike a vendor who might accept a payment plan, the CRA and provincial tax bodies wield severe collection powers, including the ability to freeze bank accounts or garnish receivables. This liquidity crisis, born from the “Ghost Money” illusion, accounts for a statistically significant portion of insolvency filings in the first quarter.

Section 2: Threat Vector 1: Payroll, T4s, and The Compliance Minefield

2.1 The T4 Slip: Beyond Basic Wages

For a standard office business, T4s are relatively straightforward: salary, standard deductions, perhaps a taxable benefit for parking. For a restaurant, the T4 is a minefield of potential errors due to the unique compensation structures of the hospitality industry. The high prevalence of part-time work, split shifts, and the cultural centrality of tipping creates a complex data environment that defies simple “set it and forget it” payroll processing.

The Tip Conundrum: Controlled vs. Direct

The most common and dangerous error in Canadian restaurant payroll is the mishandling of gratuities. The CRA distinguishes sharply between “Controlled Tips” and “Direct Tips,” and this distinction determines the T4 reporting requirements and the calculation of source deductions.

Controlled Tips (Box 14):

Controlled tips are those that pass through the employer’s control. This includes mandatory service charges (auto-gratuities) added to large parties, tips allocated from a tip-sharing formula determined by the employer, or tips added to credit/debit card payments that are then distributed by the employer.

• The Requirement: These amounts are considered pensionable and insurable earnings. They must be included in the employee’s income on the T4 (Box 14). The employer must deduct CPP and EI premiums on these amounts and remit the employer’s matching portion.
• The Risk: Many restaurant owners treat credit card tips as “flow-through” cash, handing it out in cash nightly or weekly without recording it on payroll. This is, strictly speaking, tax evasion. If audited, the CRA will assess both the employer and employee portions of the missed CPP/EI, plus penalties and interest. The retroactive bill for a busy restaurant can be catastrophic.

Direct Tips (Non-Reportable by Employer): Direct tips are those paid directly by the customer to the employee (cash left on the table) or pooled tips where the employees themselves determine and control the distribution method without employer intervention.

• The Requirement: The employer generally does not report these on the T4. The employee is solely responsible for tracking and reporting them on Line 10400 of their T1 General Tax Return.
• The Nuance: If the employer “facilitates” the tip pool, for example, if the manager counts the cash at the end of the night and divides it according to a set formula, the CRA may argue that the employer has taken “control,” reclassifying these as controlled tips. This reclassification would trigger retroactive liability for CPP and EI.

Accountific Insight: We strongly advise clients to move toward a “Controlled Tip” model processed via payroll. While staff may initially resist the deduction of taxes, this approach provides them with verifiable income, which is crucial for securing mortgages, car loans, or rental agreements. For the employer, it insulates the business from the existential risk of a CRA audit regarding unreported income. It is the only way to truly “get your ducks in a row” regarding labour compliance.

The 2025/2026 Curveball: Canadian Dental Care Plan (CDCP) Reporting

New for the 2025 tax year (filed in February 2026), the CRA has introduced mandatory reporting requirements regarding the Canadian Dental Care Plan (CDCP). This is a significant administrative addition that many DIY bookkeepers or generic payroll software users might overlook.

Employers must now indicate on the T4 (Box 45) and T4A (Box 015) whether an employee had access to dental coverage on December 31st of the tax year. “Access” is the operative word; it applies even if the employee did not choose to use the coverage. The codes are specific and mandatory:

• Code 1: No access to any dental care insurance or coverage of dental services of any kind.
• Code 2: Access for payee only.
• Code 3: Access for payee, spouse, and dependent children.
• Code 4: Access for payee and their spouse.
• Code 5: Access for payee and their dependent children.

Operational Impact: Restaurant owners must review their group benefits plans (if applicable). Even if the restaurant offers no benefits, which is common in smaller establishments, the T4 must still be coded, likely with Code 1. Leaving this box blank may cause T4 rejection or penalties for failing to file a complete return. This adds a layer of data validation to the February workload that did not exist previously.

2.2 The T4A Trap: The “Subcontractor” Myth

A pervasive myth in the restaurant industry is that casual labour does not require paperwork. This includes the band playing on Friday night, the cleaner who comes in twice a week, or the “consultant” chef helping with a menu launch.

The Rule: If a business pays an independent contractor more than $500 in a calendar year for services, a T4A slip must be issued. The CRA uses this to track income that might otherwise go unreported by the recipient.

• Common Targets: Live musicians/DJs, window cleaners, knife sharpening services (if sole proprietors), and freelance social media managers.
• The Consequence: Failure to issue T4As can lead to the CRA denying the expense deduction for the business. If a restaurant paid a band $5,000 over the year and did not issue a T4A, the CRA could theoretically disallow that $5,000 deduction, increasing the restaurant’s corporate tax bill, while also fining the business for the missing slip. This double jeopardy can turn a simple oversight into a costly error.

2.3 The Penalty Regime

The cost of missing the February 28 deadline is calculated per slip, per day. For a restaurant with 30 or 40 employees (including seasonal summer staff), these penalties escalate rapidly.

Small Employer Relief (<50 slips):

For the 2025/2026 period, the CRA has implemented a relief policy for small employers to ensure penalties are proportionate.

• 1 to 5 slips filed late: Flat penalty of $100.
• 6 to 10 slips: $5 per day, up to a maximum of $500.
• 11 to 50 slips: $10 per day, up to a maximum of $1,000.

While these caps offer some protection, the real cost often comes in the form of interest. On top of penalties, interest is charged on any unpaid remittances at the prescribed rate. For the first quarter of 2026, the prescribed rate on overdue taxes is projected to be 4%, compounded daily. While 4% may seem manageable compared to credit card rates, the compounding effect, combined with the fact that interest/penalties paid to the CRA are not tax-deductible, makes this expensive debt. It is “dead money” that generates no return for the business.

Section 3: Threat Vector 2: The GST/HST Liquidity Trap

3.1 The “Not Your Money” Mindset

Goods and Services Tax (GST) and Harmonised Sales Tax (HST) are consumption taxes. The restaurant acts merely as an agent for the government. The moment a customer taps their card to pay a bill, the 5% (GST) or 13-15% (HST) portion of that transaction creates a liability.

In the restaurant industry, cash flow is often managed on a “bank balance” basis. If the banking app shows $15,000, the owner feels they have $15,000 to spend. However, if $2,000 of that is GST collected over the last month, the real operational cash is only $13,000. This cognitive dissonance is the primary driver of the February panic. When the remittance is due, the money has often been “reinvested” in the business, spent on food or wages, leaving the owner scrambling to find cash to pay the taxman.

3.2 Filing Frequencies and February Danger

The reporting frequency assigned by the CRA dictates the rhythm of risk.

• Monthly Filers: Must remit January’s GST by February 28. This coincides with the lowest revenue period of the year, making the cash outflow particularly painful.
• Quarterly/Annual Filers: While quarterly filers might not have a deadline on February 28 (Q1 is typically due April 30), they often fall behind on instalments. The CRA requires quarterly instalments if net tax owing is greater than $3,000.. Annual filers with a December year-end must pay their balance by February 28 to avoid interest, even if the paperwork is not due until June.

3.3 The Penalty Calculation

Late filing of GST/HST incurs a penalty calculated as 1% of the unpaid amount + 0.25% per month times the number of months the return is late. For example, if a restaurant owes $10,000 in HST and files three months late:

• Initial 1%: $100
• 0.25% x 3 months = 0.75%: $75
• Total Penalty: $175 (plus interest).
  While the penalty percentage seems low, it flags the account for audit. The CRA’s algorithms prioritise businesses with a history of late filing for deeper scrutiny, which can lead to a full trust examination.

Section 4: Threat Vector 3: Workers’ Compensation (The Silent Killer)

While CRA taxes dominate the headlines, provincial Workers’ Compensation Boards (WCB) wield significant power, including the ability to seize assets or put a lien on the business without a court order. They are often the “silent killer” of restaurant liquidity because their premiums are paid in arrears or reconciled annually.

4.1 Provincial Variances

• British Columbia (WorkSafeBC): The Annual Employer’s Payroll Report (AEPR) is strictly due February 28, 2026. Employers must report gross payroll and pay any difference between their estimated premiums (paid throughout 2025) and their actual premiums based on final payroll. If the restaurant had a busy summer and payroll was higher than anticipated, this “true-up” payment can be thousands of dollars.
• Alberta (WCB): Similar to BC, the Annual Return is due February 28, 2026. Alberta hotels and convention centres saw a rate decrease for 2026 (to $0.95/$100), but general restaurant rates fluctuate based on industry performance.
• Ontario (WSIB): The reconciliation deadline is March 31, but the data gathering (gross insurable earnings) is identical to the T4 process. Smart restaurants complete this in February to ensure the “Gross Pay” on T4s matches the “Insurable Earnings” reported to WSIB.

4.2 The “Assessable Earnings” Trap

Restaurant owners often overpay WCB premiums by failing to deduct “excess earnings.” Each province has a maximum assessable earnings cap (e.g., ~$121,500 in BC for 2025).

• The Mistake: If a General Manager or Executive Chef earns $130,000, the owner often pays premiums on the full amount.
• The Fix: Accountific ensures premiums are only paid up to the cap. On a $130,000 salary, failing to cap the earnings results in paying premiums on an extra $8,500, money that the board does not require and will not refund unless asked. Multiplying this across several senior staff members can result in high unnecessary costs.

Section 5: The Strategic Solution: The Accountific “Control” System

The “Accountific DNA” rejects the chaos of reactive accounting. We advocate for a structural change in how money is managed, moving from “gut feel” to a system of “Separation Strategy.”

5.1 The “Tax Holding Account” Strategy

The most effective defence against the February Triple Threat is the establishment of a dedicated Tax Holding Account. This is a secondary bank account, often a high-interest savings account to offset inflation, used solely for government remittances. It physically partitions the government’s money from the restaurant’s operating capital.

The Algorithm of Allocation

Instead of guessing, restaurant owners should apply a fixed percentage of daily sales to be transferred to this holding account.

Simplified Restaurant Rule of Thumb:

1. GST/HST: Set aside 100% of the tax collected daily. Modern POS systems (Toast, TouchBistro, Lightspeed) provide a daily sales summary isolating this number.
2. Payroll: Set aside 15-18% of Gross Sales (depending on labour cost targets). This covers net pay + source deductions.
3. Corporate Tax: Set aside 2-3% of Gross Sales (for profitable entities).

Automation:

Using digital banking tools, this transfer should be automated.

• Action: Every Monday, the bookkeeper (or owner) reviews the previous week’s sales and transfers the exact GST/HST amount + estimated payroll burden to the Tax Holding Account.
• Result: When February 28 arrives, the funds are sitting in the holding account, ready to be remitted. The operating account reflects the true cash available for food, rent, and repairs. This eliminates “Ghost Money” and the panic that accompanies its disappearance.

5.2 Weekly Bookkeeping: The “Turn and Burn” of Finance

In the kitchen, “turn and burn” means flipping tables quickly to maximise revenue. In accounting, we apply this speed to data processing. Waiting until year-end to reconcile books is disastrous.

The Accountific Strategic Bookkeeping:

1. Tuesday: Fetch all digital invoices and POS reports from the previous week.
2. Wednesday: Reconcile bank feeds. Match labour costs to the schedule.
3. Thursday: Update the “Flash Report”, a one-page summary for the owner showing Prime Costs (COGS + Labour) vs. Sales.
4. Friday: Execute the transfer to the Tax Holding Account.

By reconciling weekly, we catch the “T4A” issues (e.g., the band paid in cash) immediately, rather than 12 months later when memories have faded, and receipts are lost. This proactive cadence ensures that February 28 is simply a matter of filing a return based on data that has already been verified 52 times throughout the year.

5.3 Digital Hygiene: “86” the Paper

The term “86” means to get rid of something. Restaurants must “86” paper invoices. The modern restaurant finance stack is fully digital:

• The Ledger: Xero (Cloud Accounting).
• The Capture: Dext (Receipt scanning and OCR).
• The Payroll: Wagepoint or Push Operations (Automated calculations and filings).

Digital payroll systems like Wagepoint automatically calculate T4s and can often auto-file them with the CRA, provided the data is clean. This turns the February 28 deadline from a manual data-entry marathon into a simple “Review and Submit” click. It transforms compliance from a manual struggle into a digital workflow.

Section 6: Specific Action Plan for the “Feb 28 Triple Threat” Blog Post

Based on the research above, the following is the strategic framework for the assigned blog post. The goal is to translate this high-level compliance data into the empathetic, “advisor” voice of Accountific.

6.1 The Hook: Validate the Anxiety

We must start by acknowledging the “Janu-worry.” Use the idiom “In the weeds” to describe the feeling of being overwhelmed by paperwork while trying to run a kitchen.

• Drafting Note: “You know that feeling when the printer chits are dragging on the floor, and you’re three tickets behind? That’s February 28th for your bank account if you aren’t prepared.”

6.2 The “Meat”: De-mystify the Triple Threat

Break down the three monsters (T4s, GST, WCB) into simple terms.

• Key Insight to Share: “The CRA doesn’t care that January was slow. The deadline is written in stone.”
• Highlight: The new Dental Reporting (Box 45). Frame it as “The new box you can’t ignore.”

6.3 The Solution: The “Tax Vault”

Pitch the separate bank account strategy.

• Metaphor: “Treat your GST like gluten in a non-celiac kitchen—keep it completely separate so it doesn’t contaminate your operating cash.”

6.4 The CTA: Accountific as the Head Chef of Finance

Position Accountific not just as bookkeepers, but as the “Expediter” for the business.

• Message: “You cook the food; we’ll cook the books (legally).”
• Offer: A “February Survival Consult” to review their T4 readiness.

Section 7: Advanced Compliance Nuances (Internal Knowledge Base)

7.1 The “Director’s Liability” Reality

It is vital for the Accountific team to remind clients why GST and Payroll are non-negotiable. Unlike debts to suppliers (Sysco, GFS), which die with the corporation in a bankruptcy, GST and Payroll source deductions pierce the corporate veil.

• Section 227.1 of the Income Tax Act: Directors are personally liable for unremitted source deductions and GST.
• Implication: If a restaurant fails and owes the CRA $50,000 in payroll taxes, the CRA can come after the owner’s personal house and car, even if the business was incorporated. This fact is a powerful motivator for compliance.

7.2 Dealing with CRA Reviews (PIER Reports)

Post-February 28, the CRA runs the Pensionable and Insurable Earnings Review (PIER).

• What it is: A computer check comparing the T4 Box 14 (Income) to Box 16 (CPP) and Box 24 (EI).
• Common Error: If the math doesn’t check out (often due to manual payroll calculations or software overrides), the CRA sends a PIER report demanding the difference.
• Prevention: The “Weekly Bookkeeping” model allows Accountific to run a “Mock PIER” report in January, catching errors before the T4s are filed in February.

Conclusion: Achieving Control

The “Feb 28 Triple Threat” is only a threat to the unprepared. For the Canadian food entrepreneur, the path to “Achieving Control” (Accountific’s Step 4) lies in recognising that financial management is as much a craft as culinary arts. It requires the right tools (Cloud Accounting), the right techniques (Separation Strategy), and the right team (Accountific).

By adopting the protocols outlined in this article, specifically the Tax Holding Account and Weekly Reconciliation, restaurant owners can insulate themselves from the “deadline cascade.” They can move from a state of “Janu-worry” to a position of financial confidence, ensuring that their business is not just surviving the winter, but positioned to thrive in the spring.

Summary of Key Dates (2026)

Deadline	Requirement	Agency	Notes
Feb 15	Payroll Remittance (Jan)	CRA	Regular monthly remittance.
Feb 28	T4 / T4A Filing	CRA	Copies to employees & CRA.
Feb 28	GST/HST Return (Jan)	CRA	Payment due for annual filers too.
Feb 28	Annual Payroll Report	WorkSafeBC / WCB Alberta	Reconciliation of 2025 premiums.
Mar 31	WSIB Reconciliation	WSIB (Ontario)	Prep in Feb to match T4s.
Apr 30	Personal Tax (T1)	CRA	Proprietors must pay by this date.

 

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David Monteith, founder of Accountific, is a seasoned digital entrepreneur and a Xero Silver Partner Advisor. Leveraging over three decades of business management and financial expertise, David specialises in providing tailored Xero solutions for food and beverage businesses. His deep understanding of this industry, combined with his proficiency in Xero, allows him to streamline accounting processes, deliver valuable financial insights, and drive greater success for his clients.