By Heather Young
According to the Canada Revenue Agency, fees for services provided by contract staff should be reported on a T4A slip in Box 048.
CRA’s Guide – titled RC4157 Deducting Income Tax on Pension & Other Income, and Filing the T4A Summary – directs payers to: “Enter any fees or other amounts paid for services. Do not include GST/HST paid to the recipient for these services.”
A couple of observations.
The CRA makes no distinction regarding who provided the services. Many companies assume T4A slips are for freelancers – but that’s not what the Guide says. An email to the Canadian Payroll Association’s InfoLine confirmed that incorporated businesses should also receive T4A slips.
And for sure HST registration makes no difference! Every year, clients’ contract staff tell Young Associates bookkeepers that they don’t want a T4A slip because they have an HST number. Whether or not a contractor charges HST is irrelevant to the payer’s T-slip obligation.
Make no mistake: this has nothing to do with individual preferences. Our job is to do our best to help our clients – the payers – comply with the Income Tax Act.
We hear all sorts of variations from payers too. Some companies are willing to issue T4As to freelancers who work under their own name but not to those who have a company name. Other organizations make apparently arbitrary decisions; for instance, that they’re willing to issue T4As to actors but they don’t want to generate slips for technicians.
Indeed, there’s a lot of confusion out there – and, to boot, a tacit acknowledgement on the part of the CRA that the T4A requirement is unclear.
CRA’s Guide RC4157 goes on to say: “Currently the CRA is not assessing penalties for failures relating to the completion of box 048.”
We don’t take this as a blanket pass for organizations to do whatever they want – and we don’t think you should either.
The wisdom from the Canadian Payroll Association – experts in the field – is that organizations should implement a process for issuing T4A slips to contractors so that when the CRA provides clear guidance they are able to comply immediately.
We can add to this some experience of payroll audits, where CRA examiners have scrutinized companies’ practices around T4A slip preparation.
Young Associates’ position is that clients need to work with their auditors and boards to interpret the Guide as best they can for their own situation. We always advocate for CRA compliance – and, if anything, for a more conservative interpretation that protects you from unwelcome attention from the government.
We appreciate comments on this post, although please note that Young Associates specializes in services for organizations. If you are an individual with a question about a T4A issue related to personal tax, we suggest that you contact a bookkeeper or accountant who prepares personal tax returns.