CRA adds T4 reporting requirements to validate benefit payments

The Canada Revenue Agency (CRA) is requiring Canadian employers to provide additional information on T4 slips for the 2020 tax year as part of its efforts to track pandemic-related benefits.

The CRA is looking to “validate payments” made under the Canada Emergency Response Benefit (CERB), the Canada Emergency Wage Subsidy (CEWS) and the Canada Emergency Student Benefit (CESB) programs.

In an update posted to the CRA website yesterday, the CRA states that all Canadian employers will be required to report employment and retroactive payments on the T4 Statement of Remuneration Paid slip for defined periods under new information codes. These are:

• Code 57: Employment income – March 15 to May 9
• Code 58: Employment income – May 10 to July 4
• Code 59: Employment income – July 5 to August 29
• Code 60: Employment income – August 30 to September 26

Each period, which aligns with periods relating to Covid-19 benefit eligibility, pertain to the day the employee was paid, not necessarily the work the payment covered. For example, if an employer is reporting employment income for the period of April 25 to May 8, payable on May 14, that information would be reported under Code 58.

The new reporting requirements are in addition to the existing requirement to report employment income in Box 14 using Code 71.

One tax specialist said she’s not surprised that the government is asking employers to provide additional information.

“The [Covid-19 benefit] programs were implemented quite quickly, as the government sought to provide assistance on a timely basis and not have recipients face financial distress,” said Lea Koiv, president of Lea Koiv & Associates in Toronto. “[But] many of us were wondering how the claims would be verified. Now we see the start of the process.”

Koiv said that while she supports the government helping Canadians in need due to the global pandemic, the funds paid out have resulted in a significant deficit, which Ottawa recently estimated at $343 billion. 

Payments in relation to the three Covid-19 programs have “gone out at a fast and furious pace,” Koiv said. As of August 16, $70.0 billion had been paid out under the CERB program, and as of Aug. 19, $29.9 billion under CEWS and $2.7 billion under the CESB.

Considering the size of those amounts, it’s understandable that the government is trying to root out fraud in the programs, Koiv suggested.

“Those who knowingly made false claims may start losing sleep,” said Koiv, who points out the government has provided a process for returning CERB payments accessed inappropriately. “[Those people] should take action now.”

This CRA announcement this week is the latest sign that the CRA is ramping up Covid-19 compliance efforts.

Over the summer, the agency announced it was launching an audit program in relation to CEWS using risk assessment tools and random sampling, looking to identify types and levels of non-compliance. The findings would be used to “inform” CEWS audit program to be launched this fall, the CRA indicated.

As well, the CRA updated the information on its leads program — or “snitch line” — website to encourage Canadians to report ineligible access to, or misuse of, the CERB, CEWS or CESB programs.

In a report published today, the Fraser Institute suggests the government “wasted” more than $22 billion through poor or inadequate targeting of benefit programs

For example, up to $11.8 billion was paid under CERB to people between the ages of 15 to 24 who had 2019 earnings between $5,000 and $24,000 and who are living with their parents in households with at least $100,000 in household income, according to the report.

“Our research shows that billions are being borrowed to finance transfers to people whose need is at least questionable, and this at a time when Ottawa is running historic deficits,” said Jason Clemens, executive vice president at the Fraser Institute, in a release.