T4 and T5 Late Filing Penalty for a Small Corporation

What is the penalty if T4 or T5 slips are filed late or never filed?

A T4 or T5 return filed after its due date, or never filed, draws a penalty of at least $100. Under the Income Tax Act it is the greater of that minimum and a daily amount, counted for each day the failure continues, up to 100 days. The daily amount rises with the number of late slips (Income Tax Act, s. 162(7.01); CRA: when to file). For a T5 return the CRA states a highest maximum of $7,500 (CRA: T5 penalties).

Interest also runs on an unpaid penalty (CRA: T5 penalties).

What makes a case not simple. Each calendar year is its own return, and T4 and T5 are separate return types, so several missed years multiply the penalty. The slips must also agree with the corporation's books, its T2 and the owner's personal return; the CRA may contact an employer if the information provided does not match the CRA's records (CRA: Employers' Guide). Payments never recorded properly in the books have to be recorded before the slip amounts are known. If a penalty notice has arrived, first check the account, year, filing date and slip count. To dispute an incorrectly assessed penalty, the corporation generally must object within 90 days after the notice was sent (Income Tax Act, s. 165(1)). Asking for an explanation or for relief does not replace an objection. See Penalties, interest and relief.

Gather before filing:

• Payroll or bank records of every payment of owner salary, by calendar year.
• Dividend resolutions and payment records, by calendar year.
• The corporation's T2 returns and financial statements for those years.
• The owner's personal returns for the same years.
• The corporation's payroll account and information returns (RZ) account numbers.
• Any CRA penalty notice or letter, and the date each slip was actually filed.

When are T4 and T5 slips due, and what counts as late?

Both returns are due the last day of February after the calendar year the pay or dividend belongs to. If that day is a weekend or a CRA-recognized holiday, the return is on time when the CRA receives it, or it is postmarked, by the next business day (Income Tax Regulations, s. 205(1); CRA: when to file).

A return is late if it is neither received by the deadline nor, for a permitted paper filing, postmarked by it. A T4 is reported for the year the pay is paid (CRA: Employers' Guide); a T5 follows the calendar year of the dividend (CRA: T5 Guide).

Does the CRA have a lighter late-filing rule when only a few slips are late?

For T4 and T5 returns, and for NR4, T4A, T4E and T5018 returns, the CRA's administrative policy reduces the penalty a filer may be charged: a flat $100 for 1 to 5 late slips, and $5 a day, at most $500, for 6 to 10 (CRA: when to file). The CRA's page says a filer may be charged the reduced amount and lists no other condition. The policy is not part of the Act, so check any notice against the row for your slip count.

Count late slips separately for each return type and calendar year. The Act sets the penalty by the number of late returns of a prescribed type, and the regulations list T4 and T5 as separate types (Income Tax Act, s. 162(7.01); Income Tax Regulations, s. 205(3)). Finance Canada's explanatory notes, which are not law, describe the penalty the same way: "of a particular type" (Finance Canada). One late T4 and one late T5 therefore draw two penalties. The CRA's policy page does not say how it counts, so check a notice against the row for each type; interest runs meanwhile on any unpaid amount.

Is there a separate penalty for not giving the slip to the employee or shareholder?

Yes for T4 slips. The CRA may charge $25 a day for each T4 slip not given to an employee by the last day of February, with a minimum of $100 and a maximum of $2,500 (CRA: Employers' Guide; CRA: distribute the slips).

The same duty covers a T5: the regulations require copies of T4 and T5 returns to go to each recipient on or before the filing date (Income Tax Regulations, s. 209). The CRA's T5 pages state no figure for a missing T5 copy (CRA: T5 Guide). The Act's general penalty for failing to comply with a duty under the regulations is the greater of $100 or $25 a day, up to 100 days, where no other penalty is set (Income Tax Act, s. 162(7)), so a T5 never given to the shareholder may draw it. The pages read do not say whether the CRA assesses it.

If you never received your own T5. The corporation still owes the T5 filing, and the shareholder still reports the dividend on the personal return, grossed up, with or without a slip (CRA: line 12000). The corporation's dividend records show whether each payment was eligible or not. For the gross-up and the tax, see Tax on dividends from your corporation.

Do I have to complete a T5 slip for dividends I paid myself, and is there a minimum?

Yes, when the corporation paid or credited a dividend to a resident of Canada: an eligible dividend, a dividend other than eligible, or most deemed dividends. A capital dividend needs no T5, and neither does a year in which everything paid to one recipient totals less than $50 (CRA: when to prepare a T5). The CRA's rule turns on who receives the dividend and where they live; its page sets out no separate rule for the owner of the paying corporation.

A T5 is one slip per recipient, so a spouse or other shareholder who was paid a dividend gets their own, and the $50 test applies to each recipient (CRA: T5 Guide).

Do not file a nil T5 for a year with no dividends (CRA: T5 Guide). The T5 is filed under an information returns (RZ) program account on the corporation's business number (CRA: RZ account). For the resolution, the payment and the boxes on the slip, see Declaring and paying a dividend.

I never issued slips for earlier years: do I still file them?

Yes. The regulations require a return for each calendar year in which the corporation paid salary or dividends (Income Tax Regulations, s. 200(1); s. 201(1); s. 205), and the CRA's filing pages state no cut-off after which a missed return no longer needs filing. Address any voluntary-disclosure question first (next paragraph), then file promptly: a return under 100 days late still adds a daily charge. One already past 100 days is at the cap, so filing adds nothing to that penalty, but interest runs on any unpaid penalty, and acting quickly to fix an omission is a factor the CRA weighs in a relief request (IC07-1R1).

If earlier personal returns left out the pay or dividends, consider the voluntary disclosure route before ordinary catch-up filings. It generally does not cover penalties already assessed, and an audit or investigation about the disclosed information, against the taxpayer or a related taxpayer such as a controlled corporation, makes an application non-voluntary (CRA: VDP eligibility).

1. Rebuild each year. From payroll records, dividend resolutions and bank statements, list what was paid to whom, by calendar year.
2. Reconcile. Check each year against the books, the T2 and the owner's personal return. Where they disagree, the amounts to report depend on what was actually paid and how it was recorded, and an amended slip can follow a wrong one. Money taken out without being called salary or a dividend needs sorting before a slip can be chosen: see Shareholder loans and Paying yourself a salary after the fact.
3. File one return per year and per type. Each return is a summary and its slips. Report a T4 for the year the pay was paid and a T5 for the year the dividend was paid or credited.
4. Give each recipient their copy, the owner and any other shareholder included.
5. Keep proof. Save the filing confirmation and date for each return.

The CRA's filing pages give no separate procedure for old years and do not say how far back the online tools accept, so the CRA is the one to confirm the route; note the date and the answer. If deductions were never remitted, see Late payroll remittance.

Do I have to file T4 and T5 returns online, and what if I file on paper?

A return of more than 5 slips of one type for a calendar year must be filed online; 5 or fewer may go on paper (Income Tax Regulations, s. 205.1; CRA: how to file). Filing in the wrong format draws a separate penalty of $125 for 6 to 50 slips, rising to $2,500 for 2,501 or more (Income Tax Act, s. 162(7.02)). It is separate from the late-filing penalty.

Online means Web Forms, for up to 100 slips a submission, or Internet file transfer for larger returns (CRA: how to file; CRA: Web Forms). Web Forms signs in through My Business Account or Represent a Client, or with a Web access code: tied to the payroll account for a T4 and to the business number for a T5 (CRA: Employers' Guide; CRA: T5 Guide).

How do I add, amend or cancel a T4 or T5 slip after filing?

A slip can be added, amended or cancelled online or on paper. For a T4, either way works however the original was filed (CRA: Employers' Guide; CRA: T5 Guide).

On paper, give the recipient two copies of an amended or cancelled slip and send the CRA one copy with a letter explaining the reason. Do not file an amended summary.

Can the CRA cancel a late T4 or T5 penalty?

Possibly, but relief is discretionary. Extraordinary circumstances or the CRA's own actions may support cancelling penalties and interest. Inability to pay or financial hardship generally supports interest relief; cancelling a penalty on that ground is exceptional, and the CRA may consider other circumstances too. It can waive a penalty before it is charged or cancel one already assessed (IC07-1R1).

The CRA weighs whether the corporation has a history of compliance, whether it took reasonable care, and whether it acted quickly to fix the omission (IC07-1R1). For an information return, the discretion covers a period that ends within 10 calendar years before the year of the request (CRA: T5 Guide). A penalty for an older period falls outside that discretion.

A business applies on Form RC4288, or signs in to My Business Account or Represent a Client and selects the request for relief of penalties and interest, with all relevant documents (CRA: how to apply). Relief does not remove the filing duty. For the full process, see Penalties, interest and relief.

What about Quebec's RL-1 and RL-3 slips?

Quebec uses its own slips: the RL-1 for employment income and the RL-3 for investment income, including dividends. Both are filed with Revenu Québec, which sets its own deadlines and penalties. The CRA figures on this page do not cover them, and a federal T4 or T5 does not replace them. See Running payroll for the RL-1 and Declaring and paying a dividend for the RL-3.

Example

Illustrative amounts in Canadian dollars. Dates shift with weekends and holidays.

Two returns filed in May

An Ontario corporation files one T4 for the owner and one T5 on May 15 instead of the end of February, about 75 days late. Each is its own return type, so the Act's formula gives about C$750 for each (75 days at C$10), C$1,500 in all. The small-filer policy lowers each to a flat C$100, C$200 in all. Interest runs on any unpaid penalty.

Three years of dividends with no T5

A corporation pays its owner C$30,000 of dividends each year for three years and issues no T5s. That is three late returns, one slip each, all more than 100 days late today.

That is C$3,000 under the Act's formula and C$300 under the policy's flat charge. The corporation files all three T5s and can ask the CRA to cancel the penalties. The owner's personal returns must show the dividends whether or not a T5 existed; if one left them out, it needs correcting too. The books must match: the same money may be recorded as a loan or salary, so the years are checked against each other.

Eight T4 slips on paper

A corporation with eight employees files its T4 return on paper, 30 days late. Eight slips is more than 5, so the return had to be online: C$125 for the wrong format. The late charge under the policy for 6 to 10 slips is C$5 a day, C$150 for 30 days. If the CRA charges both, the total is C$275 before interest.

Different for you?

• Slips are late for several years, or were never issued, and the owner's pay may not match the T2, the books or the personal return: when the records disagree, which slips to file, for what amounts, and whether to ask the CRA to cancel the penalties all depend on the facts, and past personal returns may also have left out pay or dividends. That is the point to get the years checked: see help with corporate tax filings, and catching up on unfiled corporate returns if the T2, GST/HST or payroll returns are also missing.
• The payments were never recorded properly in the books, or no resolutions exist: every slip is built from the books, so the books come first. See catching up on overdue books and bookkeeping help.
• A former accountant missed the filings and stopped answering: see what to do when an accountant missed filings.
• Remittances were missed as well as slips: see Late payroll remittance.
• The slips are for contractors, or you are unsure whether a worker gets a T4 or T4A: see T4A and T5018 for contractors and which slip to give a worker.
• A shareholder lives outside Canada: the dividend is reported differently; see non-resident owners of a Canadian corporation.