Should I be issuing T4A slips?
IMPORTANT: This post is specific to Canada. If you are not a Canada business/taxpayer then it is probably not applicable to you.
If you are a business or non-profit organisation in Canada then the answer is YES. You are required to issues a T4A slip to ANYONE who you pay any of the following types of revenue to:
- pension or superannuation
- lump-sum payments
- self-employed commissions
- patronage allocations
- registered education savings plan (RESP) accumulated income payments
- RESP educational assistance payments
- fees or other amounts for services
- income replacement payments made under the Veterans Well-being Act
- other income such as research grants, payments from a registered disability savings plan (RDSP); wage-loss replacement plan payments if you were not required to withhold Canada Pension Plan (CPP) contributions and employment insurance (EI) premiums, death benefits, or certain benefits paid to partnerships or shareholders
The two most common reasons a small business will issue T4As is to report self-employed commissions (box 20) and fees for services (box 48). For the sake of this article I am going to focus on fees for service (as commission is fairly straightforward and the other cases are far less common for small businesses).
Please note that the CRA is currently stating “The CRA is not assessing penalties for failures relating to the completion of box 048” on their T4A page (find the Box 048 section), but this can change at any time. CRA auditors have been known to review T4A filings and catch people of issues with this field.
Who should I issue T4A slips to?
There are a lot of misconceptions here. It is easier to start with the list of who you do NOT have to send these slips to. These include:
- Suppliers of goods and products
- Payments to a Crown agency, department or corporation (use form T1204 instead)
- Payments to subcontractors in the building industry (use T5018)
- Passive income paid to non-residents of Canada (use NR4)
- Suppliers who were paid $500 or less during the year
Note what is not listed here. It does not exempt payments to corporations, people with a GST number, offshore contractors, your accountant, lawyer or your bank! Technically you be sending T4As to all these entities (yes, even to me).
So for most businesses you will have a dozen or more T4A slips to issue, even if you don’t have any independent contractors. You’ll have to decide how pedantic you want to be here – do you issue a T4A slip to Google for Adwords and Aps, or to every Software as a Service product you spend more than $500 on? You should, according to the letter of the law – but given CRA’s temporary declaration of not assessing penalties for failure relating to the completion of box 048 many businesses just ignore this requirement.
We recommend sending T4A slips to all eligible on-shore service providers, including consultants, cleaners, contractors, coaches, and professional advisers. We usually ignore subscriptions, banks, software and other online services
What information do I need to include?
The form is pretty straight forward, but here are some useful comments:
- Name – you should use their legal name, not their trading name
- Number – for companies use their 15 digit BN number (their GST registration number would be fine); for sole proprietors use their SIN (which is not the same as the GST number). If they don’t (or won’t) give it to you use 000000000RP0000 for BN or 000000000 for SIN.
- Amount – enter the amount you paid them during the year into the appropriate box (48 for services). This is on a payments basis and should exclude any sales taxes you paid them.
Getting this data from Xero
Unfortunately, Xero doesn’t have a report that is ideal here. We recommend using the Account Transactions report, selecting just the account codes that are likely to have the necessary transactions, calendar year as the date range, Grouped by non, More - Cash. This will give you a transaction list that you can sort and delete rows that you don't need.
Alternatively you could create a Contact Group for T4A recipients, and then use the Income and Expenses by Contact report, filtering by contact group and type=Expenses.
I have a brief video walkthrough here: https://youtu.be/27eWNZEXzp4
When are the slips due?
Regardless of your financial year end, T4As are based on a Jan to Dec calendar year. They must be filed with CRA by 28 Feb of each year (same time as T4 and T5 slips). There are penalties for late filing or not filing T4A slips and the penalty is PER SLIP, not one penalty for all slips.
How do I file the slips?
While you can submit them online through your MyCRA account. You will need a payroll account, even if you don’t pay employees. You can use the Web Forms wizard to create up to 100 forms (but the wizard is pretty prone to crashing and requiring you to start again, so keep it to a few!). Third party and software and XML upload options are also available. Fuel Clients can request an Excel template that we can use to push out a file that can be imported to CRA.