T4A in Your Name, Not Your Corporation's: Whose Income Is It?

Whose income is it when a T4A comes in my name for my corporation's work?

A taxpayer's income from a business is that taxpayer's profit from it (Income Tax Act, s. 9(1)), so the first question is whose business earned the fee. A T4A records a payment; it does not decide that. If your corporation did the work under its own contract, the revenue is generally the corporation's, reported on its own T2, even with your name on the slip.

The slip carries your SIN, so the CRA's records show the amount against you while the income may sit on the corporation's T2. That is easy to explain with the right papers and hard without them.

A wrong-name slip is simple when the contract, the invoices and the business number are all the corporation's and only the name on the slip is wrong. It is not simple when:

• the contract or the invoices are in your own name;
• the contract was signed before the corporation existed;
• the slip amount does not match the invoices;
• GST/HST was charged under the wrong name or number; or
• the CRA has already written.

Each of these needs someone to read your contract before a return is touched. Gather the contract or engagement letter, the invoices, the T4A, the bank records for the deposits, and the corporation's legal name and business number.

Why is my SIN on the T4A and not my corporation's business number?

The payer fills in the slip from the name and number it was given. The CRA tells payers to enter the SIN the recipient provided in box 012, and for a business to enter its legal or registered operating name, with its business number in box 013. A partnership or corporation is not to be identified by a SIN in box 012 (CRA: completing the T4A slip).

A slip lands in your name when the payer's records hold you, not the corporation. Check three things:

• the name and number on the payee form or vendor profile you gave the client;
• the party named in the contract and on the invoices;
• the account the client paid into.

Does a client have to give a T4A to a corporation at all?

Generally yes. A payer issues a T4A when its fees for services to one recipient in a calendar year pass $500, and the CRA says this includes fees between businesses, corporations among them (CRA: fees and other amounts for services). When a payer does report a corporation's fees, the corporation goes on the slip by name and business number.

The CRA's slip page says it is currently not assessing penalties for failing to complete box 048, apart from a policy for trucking businesses paying Canadian-controlled private corporations; check the page for the current position (CRA: T4A slip for payers). A payer may not treat a correction as urgent.

Whether a payer had to issue a slip is the payer's question. Your corporation's income does not depend on it: section 9 looks at whose business earned the profit, not at whether a slip exists.

What should I do first: ask the client to correct the slip?

Usually, once the contract and invoices show the corporation as the supplier, ask the payer in writing for an amended or cancelled slip, with the corporation's legal name and business number. The CRA says a payer can correct a reporting error (CRA: make corrections after filing), and a payer that already filed sends the CRA amended or cancelled slips (CRA: amend, cancel, add or replace T4A slips). The CRA's page for individuals says to contact the issuer with questions about the amounts on a slip (CRA: T4A slip for individuals).

1. Compare the slip with your invoices and contract: box 048 amount, payer name and year.
2. Send the payer the corporation's legal name, its business number and a contract page or invoice showing the corporation as the supplier.
3. If the contract is in your own name, hold this step until the facts are read (see the table below). Otherwise ask it to amend or cancel the slip in your name and, if it still reports the fee, to issue it under the corporation's business number.
4. Ask it to update its payee record so the next slip is right.
5. Keep your request and every reply, dated.

The CRA pages read for this guide set out no step-by-step for a slip issued to the wrong recipient. The payer decides how to correct its own filing, and you cannot compel it.

Which return reports the income if the slip is not corrected: my T1 or my corporation's T2?

The return of the person who earned the income reports it. If the corporation earned it, that is the corporation's T2; the slip alone does not make it your income. What the contract and invoices show decides the answer:

The CRA's instructions for individuals say to enter a box 048 amount on a self-employment line (lines 13499 to 14300). They do not address a slip for income that belongs to your corporation. No CRA page read for this guide says how to show a slip for the corporation's income on your T1. Until it is corrected, the amount stays on the CRA's file against your SIN. How your T1 should show it beside the T2 is a judgement from your contract, worth settling before either return is filed. Keep the contract, the corporation's invoices and your written request to the payer with the return file.

Two traps:

• Reporting the same fee as full income on both returns would count the same dollars twice, so how the slip is handled on the T1 is settled with the contract in hand.
• Reporting it only on the T1 leaves the corporation's revenue, and any GST/HST on it, unreported.

The money went into my personal account: how do I record it in the corporation?

If the corporation earned the revenue, it records the fee once, with any GST/HST accounted for separately. A client payment into your personal account is generally recorded as an amount you owe the corporation (due from shareholder) until you move it across. If the invoice is already in accounts receivable, the payment clears that receivable and does not create revenue again.

An amount a shareholder owes the corporation can be added to the shareholder's income under subsection 15(2), unless it is repaid within one year after the end of the corporation's tax year in which the loan was made and it can be shown the repayment was not part of a series of loans or other transactions and repayments (Income Tax Act, ss. 15(2) and 15(2.6)). Even then, a balance owed without interest at the prescribed rate can add a deemed interest benefit to your income for the time it was outstanding; see shareholder loan interest. The slip in your name does not change the entries. The corporation books its revenue from its own invoices, and the slip is a document to reconcile against them.

The entries and ways to clear the balance are in corporate income in your personal account. Which way the account should run is in the shareholder loan account guide.

Can a T4A in my name make the CRA see me as an employee or a personal services business?

A slip alone does not decide either. Box 048 reports fees for services, which the CRA describes as payments outside an employment relationship (CRA: fees and other amounts for services). Whether a corporation is a personal services business turns on how you work for the client and who owns the corporation, not on the slip.

The CRA treats the employee question as one of fact, analysed case by case on the working conditions. A slip in your name is a reason to keep the corporation's contract and invoices ready, because they show who contracted. The tests are in personal services business and contractor or employee.

What about GST/HST on those invoices?

If the corporation is the supplier and is registered, it reports the GST/HST on its own invoices, whichever account the client paid. Where the corporation makes the taxable supply, it is the one that collects and remits. An unregistered corporation that is a small supplier generally does not have to register or collect. The $30,000 limit counts worldwide taxable sales, with associates, in one calendar quarter and over four consecutive quarters. A voluntary registrant must collect even below the limit (Excise Tax Act, s. 166). Directors can be personally liable for net tax the corporation fails to remit, with no assessment more than two years after they last ceased to be a director (s. 323).

Box 048 leaves GST/HST out (CRA: completing the T4A slip). A slip that equals your invoice totals with the tax added is higher than the fees.

• The corporation is registered and its number is on the invoices: the tax goes on its own GST/HST return. See filing GST/HST.
• The invoices carry your own GST/HST number, or the corporation was not registered although it was required to be: the answer depends on who the supplier was. See when to register and corporate income in your personal account.

What if the T4A amount does not match my invoices?

A gap does not necessarily mean the slip is wrong. Compare the slip with the invoice totals before GST/HST. Box 048 excludes GST/HST, and the CRA says income is reported on a T4A for the year in which it is paid, regardless of when it was earned (CRA: completing the T4A slip). The corporation reports revenue for its own fiscal period, so a January payment for a December invoice, or a year-end that is not December, can explain a gap. Reconcile the slip to invoices, receivables and payment dates before asking for an amount change. If a gap remains, ask the payer for its list of payments to you.

The full reconciliation, for fees that sit on your own business statement, is in a fees slip on your business statement.

The CRA sent a letter about the slip: what do I send?

The letter will be in your name and may propose to add the slip amount to your income. Read what it asks and by when, and have the contract and invoices read against it before you reply. Reply by the date in the letter, with documents that show the corporation, not you, earned the income. Send copies and keep the originals:

• the contract or engagement letter naming the corporation;
• invoices in the corporation's name, with its business number;
• the T4A, your written request to the payer for a correction, and any reply;
• bank records for the deposits, and for any transfer into the corporation's account;
• proof the corporation reported the revenue: its T2 and, if registered, its GST/HST return.

Reconcile the deposits to the corporation's books before replying, so the reply and the return agree. What a review letter asks, and the choices after it, are in reviews, audits and voluntary disclosure.

Example

These examples are illustrative; all amounts are Canadian dollars.

The slip is in your name, the corporation is the supplier

A Toronto consultant's corporation bills a C$90,000 project under a contract with the corporation. The invoices total C$90,000 before GST/HST. The client sends a T4A for C$90,000 in the consultant's name. She sends the client the corporation's legal name and business number and asks for an amended slip. The corporation reports the C$90,000 as revenue. The amended slip identifies the corporation. Its amount is reconciled to that client's payments and the corporation's records; it need not equal total T2 revenue.

The money went into a personal account

A client pays a C$60,000 invoice, already recorded in the corporation's books, into the owner's personal account. The corporation records C$60,000 due from the owner and reduces accounts receivable by C$60,000; it does not record revenue again. The owner transfers C$60,000 into the corporation's account before the end of its tax year, which the books show as repaid. An interest benefit for the time the amount was outstanding may still apply. The request to correct the slip is a separate step.

The client will not reissue the slip

A client refuses to reissue a C$40,000 slip, and the contract and invoices are the corporation's. The corporation reports the C$40,000 as revenue. The owner keeps the signed contract, the corporation's invoices, the deposit records and the written request to the client. If the CRA writes about the slip, those documents go in the reply. How the slip amount is shown on the owner's T1 is settled with a preparer who has read the contract.

Different for you?

• Your name is on a T4A for the corporation's work, and the CRA may match it to your T1 or the books and the slip disagree: which return reports the income, how to get the slip corrected, how the personal deposit is recorded and what to send if the CRA writes are settled by someone who has read your contract. Get corporate tax help.
• The contract is in your own name, or was signed before the corporation existed: the income may be yours. See a fees slip on your business statement; for a business moved into a corporation, see moving a business into a corporation.
• The money sat in your personal account across a year-end, or for more than one year: each amount has its own repayment deadline, one year after the end of the corporation's tax year in which the loan was made. See corporate income in your personal account and get bookkeeping help.
• The deposits, the invoices and the slip all disagree: the books need rebuilding before any return is checked. Get bookkeeping help.
• The CRA has written about the slip: see reviews, audits and voluntary disclosure and get corporate tax help.
• The corporation's returns are missing for the years involved: see which returns your business files and catching up on unfiled corporate returns.
• You are the one paying contractors and wondering which slip to give: see reporting payments to subcontractors and which slip to give a worker.
• Your corporation is in Quebec: this page covers only the federal T4A and T2. Quebec returns and slips follow Revenu Québec's rules and are not covered here; a preparer should check them against the federal position.