T4 vs T4A: Which Slip for Employees, Contractors and Fees

T4 or T4A: which slip does my worker get?

An employee gets a T4. A person you pay for a service outside an employment relationship, such as a contractor or freelancer, generally gets a T4A, unless another slip in the table below applies. The CRA says a fee paid to a person to provide a service outside employment goes on a T4A, and an employee's pay goes in box 14 of a T4.

The slip also tells you what to withhold. For most employees, CPP, EI and income tax come off every pay. For most resident contractors, nothing is withheld.

What makes a case not simple. The slip follows the worker's real status, not the label on the contract or invoice. The CRA says the facts of the whole working relationship decide employment status. A T4A given to someone who works like an employee does not make that person a contractor, and the missing deductions can stay your cost (see "What if I am not sure the worker is an employee" below). The test itself is in Contractor or employee in Canada.

It is also not simple when you have paid someone for a year or more and are unsure which slip was right, when earlier years had no slip or the wrong one, or when a CRA letter has arrived. Each year then has to be checked on its own.

What to gather first: the written agreement if there is one, invoices, each worker's payments by calendar year and date paid, any slips or CRA letters already issued or received, and each worker's Social Insurance Number (SIN) or business number.

Is there a Canadian version of the 1099 and W-2?

Not one for one, but the T4 does the job of the US W-2 and the T4A with box 048 does the job of the 1099-NEC. The T4 reports an employee's pay and the deductions taken. Box 048 reports fees paid to a contractor with nothing taken off.

Two points matter. The T4A also reports pensions, annuities and other income, so the box carries the meaning: fees for services belong in box 048. And a payer files its slips with a matching summary for the CRA, not just copies to each worker.

What does a T4 report, and what must be set up first?

A T4 reports an employee's total pay for the calendar year and what was deducted from it. The main boxes, from the CRA's T4 guide:

A payer issues a T4 when pay for the year was more than $500 (under CRA administrative policy), or when it deducted CPP, QPP, EI, QPIP or income tax at any amount. A current employee with a taxable group term life insurance benefit also needs a T4 even when pay was at or below that figure (CRA: T4 slip).

Register a payroll program account. The CRA says to register before the first remittance due date. Each pay, deduct CPP, EI and income tax, add the employer's own share of CPP and EI, and remit to the CRA (CRA: RC4110). The steps are in Running payroll; the bookkeeping entry is in Payroll journal entry.

What goes in box 048 of the T4A for a contractor (T4A mapping)?

Box 048 holds the fees paid for services, with GST/HST and PST left out (CRA: filling out the T4A). The amount belongs to the calendar year it was paid, not the year the work was done (CRA: T4A for payers). For most resident recipients, do not withhold CPP, EI or income tax.

The CRA's slip instructions and guide RC4157 set the recipient's number:

Collecting numbers, what to do when one is missing, and whether a payer with no employees needs a payroll account are in Reporting payments to subcontractors.

To keep the books ready for slips, tag each payee as employee or contractor, total each contractor's payments by date paid with GST/HST kept separate, and tie the totals to the expense accounts before filing. The contractor's own side of the slip is in Fees for services slip on your business statement.

Is there a minimum amount, and what about an incorporated contractor?

The CRA's usual rule is to issue a T4A when total payments to the recipient in the calendar year were more than $500, or when tax was deducted from any payment. The CRA describes the figure as administrative policy, so it can change.

Paying a corporation does not remove the slip. The CRA says that, generally, the payer must give the corporation a T4A covering fees for services, unless a T4A-NR, T5018 or another slip applies instead. Put the corporation's program account number (15 characters, starting with its business number) in box 013. Trucking is stricter: the CRA assesses penalties on businesses in the trucking industry that fail to report fees over $500 a year paid to a Canadian-controlled private corporation in the trucking industry (CRA).

Whether the payee corporation is a personal services business is a separate question: see Personal services business.

Which slip for commissions: employee or independent agent?

Commissions follow the worker's status. The CRA's commission page sets out three cases.

Box 020 excludes GST/HST and provincial sales tax, like box 048 (CRA).

Do subcontractors get a T4 or something else?

A subcontractor who runs a business is normally on a T4A, not a T4. A T4 applies only if the subcontractor is in substance your employee. Two other slips replace the T4A in set cases.

Filing detail and missed years for T5018 and T4A, and a non-resident whose work is done wholly outside Canada, are in Reporting payments to subcontractors. Non-resident withholding is in Withholding on services in Canada.

When are T4 and T4A slips due, and what is the late penalty?

T4 and T4A slips and their summary are normally due on the last day of February after the calendar year. If the business stops operating, they are due within 30 days, or 90 days when a partner or the sole proprietor dies (CRA). If the February day is a weekend or a CRA-recognized holiday, the next business day counts. Copies must reach employees and recipients by the last day of February (CRA: distribute slips). More than five information returns of the same type for a calendar year, such as more than five T4s, must be filed electronically.

A late return costs at least $100, and more as days and slips add up (CRA). A late or missing copy to the worker carries its own penalty. The tiers, the lighter rule for a few slips and how to file late are in Late employee and dividend slips penalty.

The CRA says it is currently not assessing penalties for failing to complete box 048, except under its trucking-industry policy (CRA). That wording covers completing box 048; it does not say late-filing penalties are waived. The policy can change, and it does not remove the duty to report.

Does Quebec add a slip?

Yes, for employment income. Revenu Québec has its own slip, the RL-1, with its own filing guide. An employer with Quebec employees deducts QPP instead of CPP (if the job is pensionable under the QPP) and also QPIP. The QPP, QPIP and Quebec income tax go to Revenu Québec, and EI and federal tax go to the CRA (CRA: T4001). RL-1 slips are normally due by the last day of February of the following year.

A Quebec employee still gets a federal T4, with QPP in box 17, as well as the RL-1 (CRA: T4 slip). Some payments to a contractor can also need an RL-1; which ones is set by Revenu Québec's guide, not by the CRA's. A federal T4A does not replace it, so check that guide before filing.

What if I am not sure the worker is an employee, or I gave the wrong slip before?

Settle the worker's status on the facts first, then fix the slips. If a worker treated as a contractor was an employee, the CRA can assess both the employer's and the employee's share of the CPP contributions and EI premiums owing, even if the payer cannot recover them from the worker, and can add penalties and interest. What it can charge and how to respond are in Payroll audits and worker-status rulings.

Steps usually run in this order:

1. Collect the agreement, invoices, payment records and slips already issued, by year.
2. Decide status for each year using the test in Contractor or employee in Canada.
3. For a worker who was a contractor, the missing T4A and summary for each year are filed late, and late penalties can apply.
4. For an employee who was paid as a contractor, payroll has to be set up and the earlier years addressed, which is not fixed by changing a slip.

Missing T4A and T5018 years are walked through in Reporting payments to subcontractors.

Example

These examples are illustrative. All amounts are in Canadian dollars.

A bakery barista

A Toronto bakery pays a barista C$2,400 a month for 12 months, sets her hours and supplies the equipment. If the facts make her an employee, the bakery withholds CPP, EI and income tax each month and files a T4 showing C$28,800 in box 14.

A freelance copywriter

A Vancouver agency pays a freelance copywriter C$7,500 for the year, plus GST. If the copywriter is a self-employed contractor, the agency issues a T4A with C$7,500 in box 048, GST excluded, and withholds nothing. The copywriter's SIN goes in box 012, or the program account number in box 013 if there is one. If the copywriter had invoiced through a corporation, no SIN would be used: the corporation's program account number would go in box 013.

A framing subcontractor

A Calgary builder pays a framing subcontractor C$60,000 during the year. If construction is the builder's main business, this resident subcontractor may belong on a T5018. If construction is not the main business and the framer is a contractor, the same payment goes on a T4A in box 048. The builder checks its own business mix before choosing.

Different for you?

• You have paid someone for a year or more and are unsure which slip is right, or past years went unreported, including workers paid in cash or by e-transfer with no slip: the answer depends on the worker's status in each year, which years' slips to correct or file late, and what payroll needs to be set up from now on. Get bookkeeping help to rebuild the year-by-year payments, and see Payroll audits and worker-status rulings for a CRA letter or ruling.
• You issued a T4A to someone who works like an employee: a different slip does not fix unpaid deductions. Start with Contractor or employee in Canada, then get bookkeeping help to rebuild the payroll side.
• You pay construction subcontractors or non-residents: see Reporting payments to subcontractors and Withholding on services in Canada.
• You pay yourself or family from your corporation (director's fees also go on a T4): see How much to pay yourself from your corporation and Paying family members.
• You received a T4A and are the contractor: use Fees for services slip on your business statement.
• You run payroll in Quebec: read Revenu Québec's RL-1 guide with the CRA rules, and use Running payroll for the federal steps.