Information Returns for Employers
If you are an employer in Canada, you may have the requirement to file different information returns at the end of year. Missing filing of information returns can cost businesses dearly. These information returns include both summaries and slips. Each slip is an information return.
Please note that this is different from the filing of information along with monthly or quarterly payroll remittances.
What information returns are due from Employers in Canada?
What type of information returns are due from an employer depends on the type of payments made to employees or contractors during the year. For example, employees are usually issued T4 at the end of the year if they have employment income.
- T4 Information Return, most common type for employment income
- T4A Information Return, when you pay other amounts related to employment
- T4A – RCA, Information Return for distributions out of an RCA trust
- T4A – NR, for commissions, fees and other amounts when services are rendered in Canada by a non-resident.
- T1204 & T5018 – Payments by construction business to subcontractors. For private sector businesses, T5018 is applicable.
Usually, T1204 & T5018 which are information returns for businesses in the construction industry have different due dates than the T4 and T4A. We are not explaining contractor payments in this post.
Who should issue T4 Slips?
Employers must issue T4 slips if they pay any of below income to employees:
- Employment income
- Commissions paid to employees
- Retiring allowances to employees
- Taxable allowances and benefits
- Either a business or any third party pays under a wage loss replacement plan
- Special situations as explained in Chapter 6 of Employer’s Guide by CRA. Read more about special situations here.
- Any other remuneration paid by an employer.
A detailed guide is available on the Canada Revenue Agency’s website here. You must read this guide if you are filing T4 returns yourself for your small business without the help of a tax accountant.
Who should file T4A Slips?
There is a misconception that if a business files T4A it can avoid paying source deductions and employer’s contributions. Sometimes small businesses use T4A information returns as a tool to secure themselves from compliance requirements by pretending that employees are independent contractors. This is not the case! Filing a T4A information return does not guarantee your compliance. Read here Employee Vs Independent Contractor.
You have to file T4A information return if you are a payer of other amounts related to employment. What is included in these other amounts related to employment is defined and explained in very detail by CRA.
Two most commonly seen (out of all other mentioned as above) are self-employed commissions and fees or other amounts for services. Self-employed commissions are not subject to any deductions hence no deduction and contribution is required. These amounts are reported only if they are more than $500 in a year.
When is the due date for filing Employer information returns such as T4 & T4A?
Information returns from employers T4 and T4A are required to be filed by the last day of February after the calendar year ends. In case if the last date of February is a holiday, the due date is the next business day. If a business stops operating, it must file information returns within 30 days.
The due date for filing T4 and T4As for the calendar year ended December 31, 2019, is Monday, March 02, 2020.
T5018 which is an information return for the construction businesses making payments to subcontractors is due six months after the reporting date chosen by the business.
What is a T4A-NR, when & why is it issued?
T4A-NR is filed by the employers in Canada (Resident or Non-Resident) if they pay amounts to Non-Residents for the services provided by them in Canada. This information return is due on the same date as T4 & T4A. Do not confuse this information return T4A-NR with NR4 Information return.
Any payments to non-residents is an important and slightly complex tax area that needs professional tax advice from a corporate tax accountant properly licensed in Canada. We do not recommend it doing it on your own, at least for the first time.
How to file Employer Information Returns in Canada?
If you are using the services of a Corporate tax accountant in Canada, usually they file these returns themselves for you. However, if you do not have a lot of slips you can do it yourself as well. Canada Revenue Agency has provided detailed guides on its website and easily accessible. These guides are also referred and linked above in their relevant areas.
Bear in mind that if the number of slips is more than 50 they must be filed over the internet. In such a case, you should seek assistance from a reputable corporate tax accountant or a professional tax preparation service.
Preparing information returns and slips is a mechanical task which demands a higher focus and attention even though there are just a few slips. Skipping important boxes or putting wrong numbers in these boxes can result in tax consequences for your employees. Wrong T4s and T4A submission needs to be corrected and may incur additional costs.
What are the penalties for not filing T4s by businesses on time?
Each slip is an information return and penalties for late filing are calculated based on the number of information returns rather than one information return for all. These penalties are calculated based on the number of days a slip filing is delayed after the due date. Penalty amounts also depend on the number of slips by the employer, for example, 5 slips or less have a flat penalty rate whereas more than 5 have a variable rate.
Penalties for not filing T4, T4A or other information return from employers are listed here.
How to send T4 Slip to an employee?
T4 Slip contains highly confidential and private information including SIN number and address along with income information of your employee. You should not send T4 slips to your employees by email. These slips can be sent by mail to employees or loaded on a secure portal to be downloaded by the employee. If an employee wants to receive T4 slip by email, (s)he should request the employer in writing.
If you are an individual tax preparer you should not ask someone to send the same by email. If you are an accountant providing services to business, you should not send the processed T4s by email to the employer.
I am an employee and I did not receive T4 – What to do?
If you have not received a T4 slip from your employer, you should first contact the employer. It might have been lost in the mail and they can mail you a copy of it. If you have access to your CRA account, you can check the same there, it should appear there. If you are not able to find your slip there, your best bet is to contact the employer, they may have forgotten to file or filed it wrong. If you cannot get hold of your employer, you can also use your paystubs issued to you by the employer. Using pay stubs to calculate your amounts will be reviewed in most cases but it’s better to file on time.
If you are expecting a T4A and do not get it, it does not mean that you can skip the inclusion of your income. You must include all your income on your tax return.
I am an employee and I received a wrong T4 – what to do?
If you received a wrong T4 you can contact your employer and they can amend the slip. You should also read your slips for any errors.
I am a sole proprietor should I issue myself a T4 Slip?
Unincorporated businesses do not issue T4 slips even if the owner is working for the business. You should cancel it if you have issued the one. For corporations, T4 slips are issued for the owners if they are drawing a salary from the corporation.
The above post is not being updated after it is published. Further, this post is very generic and cannot be employed to specific business or tax situations.
You should always refer to updated content on Canada Revenue Agency’s website or contact your corporate tax accountant or professional tax preparation services in Canada. In the province of Ontario, accounting or tax advice needs an accounting firm license from CPA Ontario. This is not applicable for the mechanical processing of tax returns so tax preparation service providers who do not hold valid licenses cannot and should not provide tax advice.
If you have any question about whether related to individual tax preparation services or corporate tax services, you can contact us at Maroof HS CPA Professional Corporation. Alternatively, you can follow us on social media or sign up for our email subscriptions to get regular tax updates.