Author: Navi Grewal, CPA, CA
Editors: Peter Weissman FCPA, FCA, TEP and Matthew Cho CPA, CA, TEP
In accordance with regulation 200(1) of the Income Tax Act, every person paying commissions, fees or other amounts for services shall report these payments on a prescribed information return (i.e., the T4A slip). Over the years, the Canada Revenue Agency (the “CRA”) has not provided clear guidance on how the fees are to be reported on the T4A slip.
Many people are under the impression that T4A slips are only necessary for unincorporated individuals. However, this is not the case and the CRA is beginning to enforce the reporting requirement for fees for services regardless of whether the services were rendered by a corporation, partnership, trust or individual.
The CRA in their publication RC4157 (the “Guide”) only states, for box 048:
“Enter any fees or other amounts paid for services. Do not include GST/HST paid to the recipient for these services.”
The only exemption mentioned in the Guide is for total payments less than $500, made in a calendar year to a service provider, on which no tax was deducted. In question 1B from the 2016 APFF Roundtable, the CRA stated that it will not require the issuance of T4As for professional or business services provided to an individual in a personal capacity or a person whose services were provided to repair or maintain an individual’s principal residence.
Where the services are provided to a corporation, the CRA made the following statement at the 2017 APFF Roundtable (Question 2):
“The administrative relief provided since 2010 is an interim measure related to a change on the T4A of the box where these amounts should be indicated and not one relieving from the obligation of payers from filing T4A slips for services rendered”.
Despite the foregoing, the most current version of the Guide (2018) states that fees for services“should be reported in Box 048” and “the CRA is not assessing penalties for failures relating to the completion of Box 048”.
As a result, non-compliance of T4A reporting for service payments is more widespread than any other income. Although the CRA has stated they will waive the penalties, they are not obligated to do so and their position can change at any time. The CRA is currently presenting seminars about these reporting requirements to various industry groups, so a change could be coming.
The CRA recently tried to subtly change administrative and assessing positions with no advance notice. For example, in the fall of 2017 the CRA began denying shareholders-employees employment expenses. This was a change made without notice. The CRA subsequently back tracked and has stated they will come out with a position for the 2019 tax year. Around the same time, the CRA changed their position on employee discounts to make them taxable. After significant backlash, the CRA reversed the change.
Given the CRA’s track record, taxpayers should not be surprised if the administrative relief from penalties for not filing T4A slips in the circumstances noted above is cancelled. If you have an issue regarding the issuance of T4A slips for fees for services, a Cadesky Tax representative would be happy to assist you.