A key aspect in maintaining a prosperous business is ensuring compliance with tax regulations. Payroll and taxes are important for any  business owners who are looking to grow their business. 

Whether you personally manage your company's payroll or not, it’s important to have a solid grasp on payroll and tax regulations so that you can stay on top of what is required from a business owner in Canada. This brings us to the T4 and T4A forms - while their names are quite similar, they have some key distinctions. This article will focus on getting a clear picture of these differences, and how businesses can use them for their employees. 

What is a T4?

The T4 form is a Statement of Remuneration Paid – basically, it’s a document that displays all the money an employee has earned from their employer throughout the year. This includes deductions and benefits such as: 

• Employment insurance
• Canada Pension Plan
• Income tax

A T4 may be given in paper form or an electronic version to an employee from their employer by the end of February. A few key pieces of information it contains are an employee’s SIN number, the gross income made before deductions, the remittances paid to CRA (EI, CPP and income tax). There are few other details as well that include union fees, benefits and such, which we’ll discuss further on.

Who gets a T4 in Canada? 

Regardless if you are a resident or non-resident, everyone working in Canada gets either a T4 or T4A. If a regular employee (full-time and part-time employee) is working in Canada, they will receive a T4 slip from their employer.

A T4A is issued to contractors and self-employed individuals. And as business owners, you might have to fill out both a T4 and a T4A depending on the types of employees on your payroll. An example would be if you regularly hire employees and contractors.

Sample T4 - overview of T4s, explaining boxes briefly

Let’s break down each section of a T4 to get a more in-depth understanding of how it needs to be filled out. Here are a few important fields or boxes in the form that you will want to pay closer attention to.

• Field 14: Depicts the total employment income before deductions made for the year
• Field 16: Shows all the contributions made towards CPP (Canada Pension Plan)
• Field 18: Has the premium for employment insurance (EI)
• Field 20: Depicts any Registered Pension Plan contributions
• Field 22: Contains all the income tax deductions made for the year 
• Field 44: Shows you any Union Dues, if applicable at all
• Field 46: Records any charitable donations you’ve made
• Field 42: Shows the total amount of income made from commissions during employment
• Field 52: Depicts the pension adjustment
• Field 55: Contains your employee’s premiums toward the Provincial Parental Insurance Plan (PPIP)
• Field 56: Contains your employee’s insurable earnings for the Provincial Parental Insurance Plan (PPIP) 

How to find and calculate amounts for T4s

In case you’re using a payroll tool like the QuickBooks payroll tool, you can simply check the ‘year–end forms’ to access your T4 information which is prepared for you by the QuickBooks team. It contains a detailed summary of all your year-to-date (YTD) transactions. This basically includes all the income towards salaries, Employment Insurance, Canada Pension Plan (QPP for Quebec) and Income Tax.

T4s for Employees

A T4 slip will show an employee how much money they earned over a calendar year, and will also display the amount of money taken out of their pay to the government. This form will be important to your employees as they will use it to complete their income taxes for the year.  

T4 forms need to be filed every year if: 

• You have paid an employee $500 or more during the calendar year. 
• There have been deductions from the employee’s pay that go towards the Canadian Pension Plan, the Quebec Pension Plan, Employment Insurance, Income taxes or Provincial Parental Insurance Plan. 
• The employee is inactive or terminated, a slip is still required.

Although some companies use post mail as their go-to option for sending T4s, an easier option is available! If you’d like to skip that hassle, you could just send it electronically. Some payroll tools make it easy to access T4s via a secure portal.

Filing a T4 with CRA

It’s usually recommended to file your T4s electronically with the CRA. If you have over 50 slips to file, electronic filing is mandatory. But you could choose to file the paper version as well if you have less than 50 slips – you can do so by accessing the forms from the Forms and publications section or by calling 1-800-959-5525. You’ll have to fill out a form for each of your employees and include it with the T4 Summary when you file. Following this, a T4 return is mailed back to the address you’ve provided on the T4 summary. But always remember: it’s advisable to keep a copy of the T4 slips and summary for your records.

Fixing or amending a T4

What if you suddenly realize you’ve made an error in the T4s after you’ve submitted them for filing? Maybe you forgot to include a bonus or commission one of your employees has earned. Or you might have made an error in an employee’s SIN number, which will then affect their Canadian Pension Plan benefits. Luckily, you can make amendments to your T4 quite easily and swiftly. Electronically, you can modify and update the necessary fields, and use summary and slip type code “A”. For paper versions, be sure to write “amended” at the top of the form to clearly denote the version (it’s preferable to use all caps for ease of reading). Also, for paper versions, a letter is required that explains your reason for the change.

Pensionable and Insurable Earnings Review (PIER) by CRA

Correspondence with the CRA is a two-way process. Once you’ve sent in your documents, the CRA reviews the amounts mentioned and tallies them with the amounts your company withheld and remitted. In case there are discrepancies in the forms (let’s say in the CPP or EI fields), the PIER will illustrate where the error occurred. A PIER is also sent if any dues are still owed. 

T4 Penalties

Ideally, you wouldn’t want to miss the last filing date, February 28th. While missing the date can incur a penalty, exceeding the number of T4s submitted in paper format can result in a fine. To ensure you steer clear of these penalties, here’s a breakdown of how the CRA calculates T4 fines for employers:

If you’ve made the error of not filing electronically for more than 50 T4s the fines are:

In case you’re late on balances above $500, the interest begins accruing from the first day.

What is a T4A? 

Now that we’ve covered the T4 slip, let’s get into the T4A. A T4A is called the Statement of Pension, Retirement, Annuity and Other Income. As mentioned earlier, this form often applies to self-employed persons or contractors, meaning the tax is rarely deducted at the source. The contractor or self-employed person must remit the required amount towards income tax. A T4A doesn’t include earnings from investments, royalties, or any job that the person is on the taxable payroll.

Reasons for issuing a T4A

While a business would primarily use a T4A for contractor employees, there are several other reasons for issuing one, including:  

• Pension or superannuation
• Fees or other amounts for services
• Self-employed commissions
• Patronage allocations
• Lump-sum payments
• Educational assistance payments (EAPs), such as the amount paid to a student from an RESP
• Annuities
• Accumulated income payments (AIPs), such as transfers to another RESP
• Other income, including research grants, death benefits, benefits paid to partnerships/shareholders, and wage-loss replacement plan payments if you were not required to withhold CPP/QPP contributions and EI premiums.

Sample T4A

Let’s take a closer look at a sample T4A to truly understand it. While it’s crucial to fill out the entire T4A correctly, we’ve identified a few key fields that might help you in the process. Remember that, in this case, you are the payer, and the contractor is the recipient.

Here are a few key fields or boxes to be aware of:

• Field 20: Shows self-employment commission income. A form T2125 is also required alongside their personal tax return.
• Field 22: Contains the income tax deducted for the T4A slip
• Field 34: Depicts a pension adjustment only. Not an income or deduction
• Field 42: Has the RESP Educational Assistance Payments
• Field 48: Shows any fees for services provided. It is the net amount only, excluding GST or HST.
• Field 105: Contains grants regarding fellowships, study awards, bursaries, scholarships, or artists’ projects. Local and international students may receive T4A slips if these grants are received.
• Field 117: Has the loan benefits
• Field 118: Contains any benefits related to medical premiums
• Field 131: Depicts any Registered Disability Savings Plan amount

T4A for Contractors 

Since the contractors or self-employed persons aren’t on your payroll, their earnings aren’t taxed like those of your regular employees. Therefore, you will need to use a T4A slip to ensure contractors are taxed correctly. 

As the business owner, you will be the one to issue a T4A to any contractors that you’ve hired to provide them with year-end documentation of their income. The T4A allows contractors and self-employed individuals to pay their dues towards income taxes which will be used to complete self-employment taxes.  

Filing a T4A with CRA

When it comes to filing a T4A, it follows the same process as that of a T4. Usually, the CRA can accommodate up to 50 T4As on paper. You’ll have to access the paper version here or call 1-800-959-5525. Or, you can file them online via internet file transfer or web forms, and if you have over 50 T4As, then an online submission is mandatory and can help you easily amend T4As if needed. You can get a walkthrough of the process here.

T4A Penalties

If you employ contractors, it’s vital to ensure your contractors get their T4As by or before the last day of February. If you miss the deadline, there is a penalty of $25 per day for each missed slip, with a fine between $100 and $2500.

While it may seem arduous, payroll and filing taxes can be simplified with some proper assistance, reducing your chances of incurring any penalties or errors. QuickBooks not only helps track your finances, like your payroll and other expenses, but it also helps you manage your books and streamlines your accounting to help prepare you for tax time when payroll year-end arrives.

Common questions on T4s vs. T4As

Who gets a T4A in Canada?

As a Canadian business owner, you will only need to give a T4A slip to the contractors and self-employed individuals you hire. Your permanent employees do not require a T4A. 

What is a T4 called in Canada?

While you may have commonly heard of a ‘T4 form’, officially, it’s known as a Statement of Remuneration Paid.

What income is reported on a T4A?

If you were to look at the official version, a T4A is a Statement of Pension, Retirement, Annuity, and Other Income. But it means that people who earn an income due to self-employment, pension or retirement are issued a T4A.

Why did I get a T4A instead of T4?

If your employer does not tax your earnings from work, it is safe to assume you are a contractor or self-employed expert. Whether freelancing or contract roles, if the employer isn’t withholding your EI or CPP contributions, you might receive a T4A instead of a T4.

Is T4 gross or net income?

A T4 requires one to fill in the total income before deductions, which is your gross income.