End of year processing guide 2021

Andrew

Updated 26 February 2023 18:52

This article will guide you through the process of wrapping up the 2021 tax year and getting ready for the 2022 financial year.

1. End of tax year preparation

These steps should be taken prior to publishing the E, EA Form and PCB2 forms.

1.1 Review configuration data

Ensure employee details are up to date. In particular the employee's email and postal address. Earnings certificate notifications will be sent to the email address provided in the 'Email' field so it is important the information is correct. However, the earnings certificate can be printed and dispersed manually if required. Additionally, check that the employee's address is complete and correct as this will prevent earnings certificate from being able to be published. A quick way to audit this information is to generate an 'Employee Details Report' and select the relevant display columns to retrieve the information.
Any new tax relief items to be claimed by employees have been set up for the final month of December payroll within Pay run inclusions > Tax reliefs, alternatively you can add this within the December pay run.
Any benefits in kind to be claimed by employees have been up for the final month of December payroll. This can be set up within the Pay run inclusions > Benefits in kind, or same as tax reliefs, can be added in within the December pay run.
Ensure the Business statutory settings is up to date as the details within will populate the end of year forms e.g. E, EA and PCB2 forms.

1.2 Process and finalise pay run

Ensure that all pay runs are finalised, including any amendment pay runs you had to create.
Ensure all tax reliefs, benefits in kind, allowances have been paid/claimed within the pay run.

Please Note: The date the pay run is PAID determines which financial year that pay run applies to. Annual forms are generated for the 2021 tax year will only include earnings etc from pay runs paid within that tax year. For example:

Pay run period ending 30/12/2021, PAID 31/12/2021 will be included in the 2021 financial year.
Pay run period ending 30/12/2021, PAID 1/01/2022 will be included in the 2022 financial year.

If you want to include every day worked within the financial year, you might have to split a pay run.

For example, a monthly pay run for period ending 1/1/2022, paid 2/1/2022. Create pay run as normal and set the pay period ending 31/12, ensuring you stipulate date paid to be 31st December. You will then need to adjust the employee hours to reflect the hours worked for the 1 - 31 December 2021 and then finalise pay run. Then create another pay run for the period ending 1/1/2022 and adjust the employee hours to reflect the hours worked for the 1st. Then finalise the pay run using the normal date paid, being 2/12/2022.

1.3 Statutory reporting and payments

When a pay run is finalised the following statutory exports are available to be uploaded/submit to the relevant Government bodies ie. LDHN for the CP39, Perkeso for EIS and SOCSO contribution files and EPF for the EPF contribution file. Refer to the following support articles for more information.

How to generate CP39 file

How to generate SOCSO Borang 8A

How to generate EPF Borang A KWSP 6

1.4 Generate and publish employee annual forms

EA form

An EA form is a Yearly Remuneration Statement that includes your salary for the relevant basis year and is used for the filing of personal taxes to LDHN. EA forms should be given to employees by 28 February 2022. How to generate and publish the EA forms can be found in this support article.

PCB2 form

PCB2 is a letter confirming that the employer has made all of the tax withholdings for a given period. This form is given to the employee who submits it to LDHN. PCB2 form should be given to employees by 28 February 2022. This support article will guide you through how to generate and publish the PCB2 form.

1.5 Generate the E form

Borang CP8D E form (Return form of employer) is a declaration report and it is submitted by an employer to LDHN every year, no later than 31 March.

Refer to this support article on how to generate the E form for submission to LDHN.

For more information on tax form submission deadlines.

2. New tax year 2022

Once the above 2021 end of tax year processing is finalised, then there are several considerations for the new financial year:

Review and update each employee's statutory details, such as number of children, marital status, residential status, residential type, worker status, EPF contribution, EIS contributions, SOCSO schemes.
Review and update each employee's tax reliefs to be claimed for 2022. Your employee should complete a TP1 form and provide to you to claim the new tax reliefs for 2022. You can add recurring or one off tax reliefs for your employee/s via Pay run inclusions > Tax relief.

Please note, tax reliefs are NOT carried over from 2021 to 2022. For more information on employee tax reliefs.

What were the new tax year 2022 changes?

For your information the changes for tax year 2022:

Tax relief items

There are 3 new tax items for 2022. These include:

Vaccination expenses on self, spouse or child of up to RM1,000
Purchase of a personal computer, smartphone or tablet for the use/benefit of self, spouse, or child and not for business use of up to RM2,500;
Expenditure on payment of electric vehicle charging facilities of up to RM2,500.

In addition to the above, some updates have been made to existing tax relief items for 2022:

Degrees other than masters or doctors of philosophy is now up to RM7,000 (previously RM1,000);
Course fees for skill improvement and self improvement is up to RM2,000 (previously RM1,000);
Contribution to the Social Security Organisation (SOCSO) and Employment Insurance System (EIS) is RM350 (previously RM250 SOCSO only).

There were other changes made to some tax reliefs by extending the year of assessment further such as:

Child care fees extended until the year of assessment 2023;
Domestic tourism expenditure until the year of assessment 2022;
Lifestyle -purchase of mobile phones, computers and tablets until the year of assessment 2022;
Deferred annuities until the year of assessment 2025.

As per currently, once the employee's tax reliefs are specified, they are then automatically deducted in the PCB/MTD calculation. For further information on how to apply the employee's tax relief items, refer to the tax relief support article. Please note that LHDN have also released the new TP1 and TP3 forms for 2022.

EPF contributions

The Budget 2022 announced that the reduced 9% rate for employee contributions has been extended until June 2022 payroll. Employees can still maintain their contribution at 11%, they will need to complete Form KWSP 17A (Khas 2022) and provide the completed form to you.

For employees who have completed the KWSP 17A form to maintain the 11% EPF contribution rate, you will need to submit your employees’ application via the EPF Employer iAkaun portal. Delete any employees who do not wish to contribute at 11% if you are copying previous data via your Employer iAkaun portal.

Additionally, the form must be completed and application submitted again for 2022, even if your employee had already applied in 2021, as last year’s form was only valid until December 2021 payroll.

The EPF contribution rates within KeyPay remain unchanged so if any of your employees are contributing EPF at a different rate in 2022 than they were in 2021, please change the EPF rate under within the employee’s profile. Information on how to do this is mentioned in the employee statutory details article.

If you have any questions or feedback, please let us know via support@yourpayroll.io