The Canadian Trucking Alliance’s Driver Inc. campaign is in full swing. It warns and educates drivers and carriers engaged in Driver Inc that Revenue Canada is treating incorporated company drivers as Personal Service Business who must provide and file T4As and not eligible for small business deductions.
In documentation provided to CTA and now published on the Agency’s website, CRA explains that while it is legal for Canadians to incorporate, they must understand what this entails and follow the proper filing procedures.
If an individual incorporates but has labour characteristics virtually indistinguishable from an employee – for example, working exclusively for one employer or not owning/having registered any equipment assets – you will be deemed a PSB and will need to file with the CRA as such.
CRA’s position on T4A reporting stems from the Income Tax Act (the Act), Section 200, which require payments listed under a specific subsection [153(1)] to be reported on an information return (T4/T4A). One of those payments listed under subsection 153(1), in paragraph (g), is “fees, commissions or other amounts for services.” In other words, it is a legislative requirement that any amount paid by one business for services provided by another business be reported on a T4A slip.
As a first step, please review CRA’s withholding and reporting requirements memo (click here) which explains all the differences between employees, incorporated businesses and personal service businesses as well as the tax implications and T4A reporting requirements.
Additionally, the information below is additional general information CRA provides to all taxpayers regarding assistance on obtaining and the process of filing T4As. CRA has published guidance on T4A reporting in two locations:
- The Canada.ca website under “T4A – Information for payers.” These pages instruct payers on how to complete a T4A slip, what to report on the slip (including fees or other amounts for services), as well as penalties and other consequences for failing to comply with the CRA’s payroll requirements.
- Guide RC4157, Deducting Income Tax on Pension and Other Income, and Filing the T4A Slip and Summary. This guide provides payers with an overview of their obligations when it comes to T4A reporting. On page 2, under “Is this guide for you?”, the guide states that payers of fees or other amounts for services must fill out a T4A slip if the total of all payments in the calendar year was more than $500. Page 12 of the guide then specifies these amounts must be reported in Box 48 – Fees for services.