Remind business owners to file T4 slips

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

So if your client is an employer, or a professional who runs his practice through a professional corporation, you should remind him that any T4s required for payment of salary or bonus in 2015 to himself, his spouse and/or his family members (not to mention their arm’s-length employees) must be issued by February 29, 2016 (update: for the 2016 tax year, it’s February 28). Otherwise, he 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.

Employee or contractor?

CRA is more likely to consider a worker an employee if:

• the employer has control over the worker’s activities;
• the employer provides the worker’s tools and equipment;
• the worker cannot subcontract her work or hire assistants;
• the worker does not bear financial risk while working for the employer; and
• the worker has minimal opportunity for profit, outside an employer-sponsored share plan.

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 its 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 sent out and to issue T4 slips to all applicable 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, 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 employees based on the prior decision.

While the court acknowledged that the corporation did file T4A slips with 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.

Jamie Golombek

Tax & Estate

Managing Director, Tax and Estate Planning, CIBC Private Wealth Team Jamie Golombek is Managing Director, Tax and Estate Planning with CIBC in Toronto. As a member of the CIBC Private Wealth team, Jamie works closely with advisors from across CIBC to support their clients and deliver integrated financial planning and strong advisory solutions. He joined the firm in 2008 after 12 years with a global investment company, where he was involved in both internal and external consulting on all areas of taxation and estate planning. Jamie has also worked for Deloitte as a tax specialist in the Toronto office, where he specialized in both personal and corporate tax planning. Jamie is quoted frequently in the national media as an expert on taxation. He writes a weekly column called “Tax Expert,” in the National Post, has appeared as a guest on BNN, CTV News, and The National, and for several years was a regular personal finance guest on The Marilyn Denis Show. He received his B.Com. from McGill University, earned his CPA designation in Ontario and qualified as a US CPA in Illinois. He has also obtained his Certified Financial Planning (CFP) and Chartered Life Underwriting (CLU) designations. In 2023, Jamie was named a CPA Ontario Fellow. The FCPA is the highest distinction that can be bestowed upon a CPA who brings distinction to themselves and to their profession through leadership and achievement in their professional, community or personal lives. Jamie is a past chair of the Investment Funds Institute of Canada’s Tax Working Group. He is also a member of CPA Ontario, the Illinois CPA Society, the Estate Planning Council of Toronto, the Canadian Tax Foundation and the Society of Trust and Estate Practitioners. For nearly two decades, Jamie taught an MBA course in Personal Finance at the Schulich School of Business at York University in Toronto.