Volume No. 19-05
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.
TAX TIP is provided as a free service to clients and friends of Cadesky Tax.
The material provided in Tax Tip is believed to be accurate and reliable as of the date of posting. Tax laws are complex and are subject to frequent change. Professional advice should always be sought before implementing any tax planning arrangements. Cadesky Tax cannot accept any liability for the tax consequences that may result from acting based on the contents hereof.
