I repaid wages to my employer. How do I avoid being taxed twice?

Arsen Accounting Services · Question 124 · Sources checked October 29, 2026

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The correct reporting depends on why the wages were overpaid and how the employer handled the repayment. A payroll error can follow a different process from repaying wages or a signing bonus because employment conditions were not fulfilled.

Obtain the employer's explanation

CRA's payroll guidance describes cases where an amended T4 reduces employment income and other cases where the original T4 remains unchanged. For certain repayments of amounts received when employment duties were not performed, the employer provides a letter supporting a deduction in the repayment year.

Net and gross repayment processes also differ. Do not assume that repaying the amount originally deposited settles every payroll deduction. Ask payroll to state the reporting process and provide the relevant documents.

Official guidance: [1].

Reconcile both years

Suppose wages were reported in one year and repaid in the next. Create a record showing the gross amount originally included, deductions withheld, repayment amount, repayment date, and any amended slip. This helps the preparer identify the proper year for the correction or deduction.

Keep a repayment file

• Original and amended T4 slips, if issued.
• The repayment demand and reason for it.
• Proof of repayment or the arrangement accepted by payroll.
• The employer's letter explaining tax-year treatment.

Do not claim both a reduction to the old year's wages and a current-year deduction for the same amount without a valid basis. If employer records and CRA's account differ, show both to your preparer. Resolve the reporting method before filing an adjustment, and retain the reconciliation so any later reassessment can be checked against it.