Due to 2020 being a leap year, the T slips – T4, T5 and T4A are all due on March 2nd, 2020. The end of February is February 29th, a Saturday, so we have until the next Monday to file the returns.
Like nearly every other form that Canada Revenue Agency is expecting you to file, there is a penalty if you file the forms late. The penalty is based on the number of forms that you are filing as well as the number of days that you are late. The more slips you have to file, the bigger the penalty is if you are late. Any of these slips can be amended later if you find out that you have made a mistake, so the strategy, if you are scrambling to meet the deadline, is to get them filed on time to avoid penalties and fix them up later.
The T4 is sent to your employees as well as CRA. The T5 is sent to shareholders as well as CRA and the T4A is sent to people you pay who are not employees, see last week’s tip. So, if you have employees, shareholders or subcontractors, you have until March 2nd, 2020 to figure out how much you paid them in 2019 and get those forms filed on time.
The rules around when to send a T4A can be pretty murky. The T4A form covers payments for services and also self-employment commissions.
You send a T4A when you pay someone who is not an employee for work that is done during the year. When you pay employees, you take deductions and you have to send a T4 so that you can report the EI, CPP and income tax that you have paid to the employee. You do not take deductions when you pay someone who is not employed by you. The number of people who you pay who are not employees could be pretty large and this is where the murkiness comes in.
Generally, we do not send T4A’s to a corporation, although you can. I have talked to CRA auditors who say that you do not have to send a T4A if the person you are paying is a corporation. If you are paying anyone involved with the construction business then you should be sending a T5018. This is a separate form that only applies to construction businesses. The T5018 form can be issued for the calendar year or for the fiscal year of your corporation. If you send a T5018, you do not send a T4A. There is a further limitation if the amount that you paid is under $500, then you do not need to send the form.
So who is left that you paid? – someone who is not an employee, not a corporation and you are not sending a T5018. These are the people to whom you should send a T4A.
For business owners who have incorporated, February is the month that they need to get their 2019 bookkeeping done. The T5 form is due by the end of February. This form reports the dividends taken out during the calendar year. It does not matter what your corporate year-end is – what matters is the amount taken during 2019.
Some business owners use the corporate bank account as though it was their own money. They make ATM withdrawals form the corporate bank account and use the money personally. This means that they actually took a dividend and that must be reported. Another situation arises when there is no receipt for money paid out of the corporate account. If there is no receipt, then the amount is presumed to be personal and is added to the dividend amount that must be claimed by the shareholders.
As you can see, it is important to get the bookkeeping done before the end of February so that the correct amount of dividends is reported on the T5 form due at the end of the month.