File T4 Slips if you are a Business Owner

Advisor's Edge

2016-02-22



The deadline to complete the employer and employee T4 filing is the last day of February.

So if you’re an employer, or a professional who runs your practice through a professional corporation, any T4s required for payment of salary or bonus in 2015 to yourself, your spouse and/or your family members (not to mention their arm’s length employees) must be issued by February 29, 2016.

Otherwise, you could face severe non-filing penalties — the quantum of which depends on the number of slips that weren’t filed on time.

The issue of penalties for not filing T4 slips came up recently in a tax case involving a Quebec business owner (7547978 Canada Inc. v The Queen, 2015 TCC 112) during the 2010 and 2011 taxation years.

The business, which specializes in merchandizing, sampling and display mounting for big-box stores in Quebec and Ontario, was operated through a corporation that was wholly owned by one individual shareholder. Employees’ jobs consisted of putting up and taking down shelving, as well as arranging and labelling merchandise. They were paid between $10 and $13 per hour.

At the end of February 2011 and 2012, the employer taxpayer filed T4A slips for workers, rather than T4 slips, believing that the workers were independent contractors and not employees. This is often beneficial from the payor’s perspective — if an individual is not an employee, then there’s no need to remit CPP or QPP contributions or EI premiums on his behalf.

In November 2012, CRA issued T4 slips for the 2010 and 2011 taxation years to the employer’s workers. The corporation was also subject to a $1,500 penalty for each taxation year (2010 and 2011) for the failure to file T4 slips for its employees.

A July 6, 2012 CRA ruling found that certain workers hired by the corporate taxpayer were actually employees who were insurable under the Employment Insurance Act. CRA relied on this ruling to cancel the T4A slips and issue T4 slips to all employees for the 2010 and 2011 years. CRA’s position was confirmed in a 2015 Employment Insurance case involving the company and two of its workers (Meunier et al v MNR, 2015 TCC 111).

The issue in the current case was whether CRA was justified in imposing penalties on the corporation for failure to timely file T4 slips, even though it did timely file T4A slips.

Under the Income Tax Act, “(e)very person […] who fails to file, when required by this Act […] one or more information returns of a type prescribed […] is liable to a penalty equal to the greater of $100 and […] where the number of those information returns is greater than 50 and less than 501, $15 multiplied by the number of days, not exceeding 100, during which the failure continues.”

The time granted to file T4 slips under the Tax Act is “on or before the last day of February in each year and shall be in respect of the preceding calendar year.”

As discussed above, the corporation didn’t file T4 slips for the remuneration paid to its workers, even though it should have done so because the workers were determined to be employees based on the prior decision.

While the court acknowledged that the corporation did file T4A slips with the CRA for the workers, “these slips were incorrect because the remuneration paid to the workers was described as being ‘self-employed commissions’ or ‘fees for services’ rather than employment income and because the expense reimbursements, such as meal allowances, travel expenses, and cash advances made to the workers, were included as being part of the income earned.”

The judge therefore concluded that, since the corporation failed to file T4 slips for its employees by the deadline required under tax law, CRA was indeed justified in imposing the penalties for the 2010 and 2011 taxation years.