Reporting Subcontractor Payments: T4A and T5018

Do I need to issue a T4A for freelancers and subcontractors?

A Canadian business generally reports fees paid to a resident independent contractor for services on a T4A slip, even when the payer has no employees. Report ordinary service fees in box 048 for the calendar year paid, rather than the year the work was done; self-employed commissions belong in box 020 (CRA: T4A for payers; CRA: reporting service fees).

The slip follows the payment and the type of work. A service provider who sends invoices and charges GST/HST can still be a T4A recipient. If the person was an employee in substance, the reporting and deductions change; see Running payroll. If the CRA has already made a worker-status ruling, see Payroll audits and worker-status rulings.

Does an incorporated contractor still get a T4A?

Yes. Paying a corporation does not by itself remove the service-fee reporting duty. The CRA says that payments for services between businesses, including corporations, generally go on T4A; T5018 or T4A-NR may apply instead when their conditions are met.

Collect the corporation's legal or registered operating name and full CRA program account number before preparing the slip. Use that number in T4A box 013, rather than an owner's SIN in box 012 (CRA: T4A identification boxes). Whether the payee corporation is a personal services business is a separate question; see Personal services business.

When does a construction business use T5018 instead?

A business uses T5018 for payments to Canadian resident construction subcontractors when construction makes up more than 50% of its income-earning activities. The work can be performed inside or outside Canada. The test concerns the payer's main activity, so a business that commissions a renovation does not become a construction business just because the project is large (CRA: T5018).

T5018 is for the subcontractor you contracted with directly. If your subcontractor hires another trade, that subcontractor reports its own payment to the trade (CRA: T5018). For covered licensed construction work in Québec, when contracts with the same subcontractor reach $25,000 before tax in the current or an earlier calendar year and both parties have Québec establishments, the contractor must obtain and validate an Attestation de Revenu Québec by the seventh day after work starts and verify its authenticity by the tenth day. Obtain attestations for a partnership subcontractor's covered members too. Contracts to correct an urgent danger to people or property are exempt. This is separate from the federal slip.

Is there a minimum payment, and do goods and GST/HST count?

The CRA's usual T4A administrative threshold is more than $500 paid to a recipient in the calendar year; a T4A is also required if tax was deducted from a payment. For T5018, the CRA describes a threshold of more than $500 per resident subcontractor, excluding GST/HST. Its detailed T5018 instructions refer to the chosen reporting period, while its overview says calendar year, so confirm the period used when a fiscal-year total crosses the threshold but a calendar-year total does not (CRA: T4A; CRA: T5018).

For T4A, test and report the service fee, excluding sales tax. For a mixed construction contract subject to T5018, test the total contract payment excluding GST/HST; if reportable, box 22 includes the full payment and applicable sales tax (CRA: T5018; Income Tax Regulations, section 238). Keep the invoice split with the payment record.

What name and tax number should I collect?

Ask each contractor for the name and address of the person or business you pay, its tax residence, and its SIN or full CRA program account number before the first slip is due. The CRA requires a payer to seek the recipient's designated number, and a self-employed individual with a business number may give it instead of a SIN for T4A box 048 or T5018. If the contractor has only a nine-digit business number, check the slip instructions before filing.

If a number is missing, document requests to the contractor and file the slip on time. The CRA says to show reasonable efforts to obtain the number and gives instructions for a T4A with no SIN (CRA: recipient information; CRA: T4A).

Do I need a payroll account, and how do I file?

A payer filing T4A or T4A-NR slips needs a CRA payroll (RP) program account even if it has no employees (CRA: service fees; CRA: T4A-NR payer number). Opening the account for slips does not turn a genuine contractor payment into wages. A T5018-only filer uses an information returns (RZ) account (CRA: program accounts).

Prepare a slip for each reportable recipient and a matching summary, or use a permitted T5018 listing with the required summary information. CRA Web Forms accepts T4A, T5018 and T4A-NR, and calculates summary totals as slips are entered. More than five slips of one type for a calendar year must be filed electronically. Give recipients their T4A or T4A-NR slips; T5018 slips need not be distributed. Late distribution can cost $25 per day per slip, with a $100 minimum and $2,500 cap (CRA). For other returns a business may owe, see Which returns your business files.

When are T4A and T5018 returns due?

T4A and T4A-NR slips and summaries are due by the last day of February after the calendar year of payment. A T5018 filer chooses a calendar year or fiscal period and files within six months after it ends; the chosen basis carries forward unless the Minister authorizes a change (CRA: filing deadlines; Income Tax Regulations, section 238).

The deadline covers the slips and summary, or the permitted T5018 listing. If the business stops operating, file within 30 days; if a partner or sole proprietor dies, file within 90 days of the death (CRA: special filing deadlines). A T4A for work invoiced in one year but paid in the next belongs to the year of payment (CRA: T4A).

What if I missed T4A or T5018 slips in earlier years?

Rebuild each missed reporting period and file its missing slips and summary as soon as the amounts and recipients are supportable. Do not put old amounts on current-period slips: T4A service fees belong to the calendar year paid, while T5018 construction amounts paid or credited belong to the period in which that happened, including barter and offsets (CRA: T4A; CRA: T5018).

1. Collect supplier invoices, contracts, bank and card payments, credits and barter records. Identify whom you contracted with and where each service was physically performed.
2. Reconcile payments to the expense ledger and prior filed slips. Separate service fees and GST/HST for T4A; for mixed construction contracts, test the full payment excluding GST/HST and report the full payment in T5018 box 22.
3. Group T4A fees by calendar year. For T5018, check earlier returns for the period basis chosen; if none were filed, choose a calendar year or fiscal period, record its end date, and assign each payment to a period. Confirm a fiscal-period threshold case with the CRA if its calendar-year total differs. Check each recipient's name, address and number.
4. File an original return for a period with no return. If a return was filed but omitted a recipient, file an additional original slip; amend an existing slip with a wrong amount (CRA: how to file; CRA: corrections). Give affected T4A or T4A-NR recipients their slips or corrections.

The CRA currently does not assess most penalties for an omitted T4A box 048, but that does not erase the filing duty. Qualifying trucking payments to a Canadian-controlled private trucking corporation are an exception; a Québec trucking payer also files RL-1 box O, code RD, by the last day of February. For late T5018 or assessed T4A returns, the CRA's reduced schedule is $100 flat for one to five slips, $5 per day up to $500 for six to ten, and $10 per day up to $1,000 for eleven to fifty; larger returns can reach $7,500. Late T4A-NR returns instead use the statutory schedule: for up to fifty slips, $10 per day, with a $100 minimum and $1,000 cap. A payer can request penalty or interest relief on Form RC4288; penalty relief must be requested within ten calendar years after the relevant tax year or fiscal period ends. See Penalties, interest and relief. For incomplete records, bookkeeping help can assist with reconciliation. For a worker-status dispute, see Payroll audits and worker-status rulings.

What if the contractor is non-resident?

Use T4A-NR for payments to a non-resident individual, partnership or corporation for non-employment services performed in Canada, regardless of amount. Report the gross Canadian-service fee in box 18, excluding sales tax; report qualifying travel expenses separately in box 20. Record where the work was done and split invoices for Canadian and foreign work. For the slip, collect the payee's tax-residence country and foreign tax ID, any assigned Canadian SIN, ITN, TTN or program account number, and all days present in Canada while under contract, including weekends and holidays (CRA: T4A-NR boxes).

For services a non-resident performs wholly outside Canada, neither T4A-NR nor T5018 is required: the T4A-NR rule covers Canadian work, and Income Tax Regulations 238(5)(c) excludes the foreign work from T5018. A treaty tie-breaker can make an otherwise Canadian-resident payee non-resident under Income Tax Act 250(5). For mixed Canadian and foreign work, retain the work-location and payment records used to allocate the invoice.

Payments for Canadian work generally require Regulation 105 withholding of 15%, remitted by the fifteenth day of the next month, or within seven days if the business closes (CRA). A treaty exemption alone does not remove withholding: for a standard waiver, the non-resident signs Form R105 and normally applies at least 30 days before services begin or the first related payment; the payer needs the CRA's authorization letter. A late waiver applies only to later payments; a flow-through partnership also attaches Form NR302 or NR303 as applicable (CRA: waiver applications; CRA: Form R105). Reasonable travel expenses can be excluded from withholding. The T4A-NR duty remains. For services performed in Québec, Revenu Québec also requires 9% withholding and RL-1 box O, code RR. A non-resident not subject to Québec income tax can seek reduced Québec withholding on Form TP-1016-V or by letter, normally 30 days before work or the first payment.

If withholding was missed, the payer owes the unwithheld amount under Income Tax Act 227(8.4), even if it did not deduct the tax; it may recover that amount from the non-resident. Subsection 227(8) adds a 10% penalty on the missed deduction, rising to 20% for a knowing or grossly negligent repeat failure in the same calendar year. Interest also applies, and the CRA may assess the payer at any time under subsection 227(10). A sole proprietor is personally the payer; general partners may owe partnership debts under provincial law (for example, Ontario Partnerships Act 10(1)). A corporation's directors at the time of a withholding failure may also owe the amount, interest and penalties under Income Tax Act 227.1, subject to its collection conditions and due-diligence defence; proceedings must start within two years after a director last ceased office.

Example

Illustrative Canadian dollars. A renovation company mainly earns construction income and chooses a calendar-year T5018 period. It pays a resident incorporated electrician C$8,000 for installation work plus C$1,040 HST. It also pays a resident incorporated bookkeeper C$2,000 for accounting support plus C$260 HST.

The electrician's C$8,000 before HST passes the T5018 threshold. The company reports C$9,040 in T5018 box 22, including HST. The bookkeeper's work is outside construction subcontract work, so the company reports C$2,000 in T4A box 048, excluding HST. It obtains each corporation's program account number and files both returns for the payment year or chosen T5018 period.

Different for you?

• The contractor may really be an employee: see Running payroll.
• The CRA has already ruled on worker status: see Payroll audits and worker-status rulings.
• You need late-filing penalty or relief details: see Penalties, interest and relief.
• You need a full list of business returns: see Which returns your business files.
• The payee corporation may be a personal services business: see Personal services business.