When it comes to tax time, employers have a lot of responsibilities. Not only are they responsible for their businesses’ taxes, but they must also file the paperwork that will allow their employees or payees to file personal income taxes.
To ensure that you have everything you need to properly issue T4 and T5 slips, we’ve put together this list of important information and filing deadlines.
Here’s what you need to know:
What is a T4?
A T4 is a Statement of Remuneration Paid. It is an information slip issued to employees that shows how much money that employee has earned and how much was withheld and remitted to the government in taxes.
An employee will use a T4 to file their income taxes each year.
As a business owner or employer, you must prepare and issue T4 slips each year for each employee that meets the following conditions:
- You have paid the employee more than $500
- Deductions for Canada Pension Plan (CPP/QPP) contributions, Employment Insurance (EI) premiums, Provincial Parental Insurance Plan (PPIP) or income tax have been made from an employee’s pay
It is necessary to issue a T4 for every current employee as well as any that are inactive or have been terminated within the tax year.
If you have employees working in multiple provinces or territories, you must issue a T4 for each province and territory where they have earned income.
T4 Due Dates
T4 slips for the previous calendar year are due to both employees and the CRA by the last day of February in the following calendar year. If that day falls on a Saturday, Sunday, or holiday, the slips will be due on the next business day.
T4 slips for the calendar year 2020 are due on Monday, March 1, 2021.
It’s important to adhere to this deadline. Failure to file on time could result in a penalty. Employers can be penalized $25 per day late, with a minimum penalty of $100 and a maximum penalty of $7,500.
Requirements for Filing T4 Slips
Employees should be provided with two copies of the T4, preferably printed on a single sheet.
You can deliver T4 slips via:
- Mail to the employee’s last known address
- In-person delivery
- Electronic delivery if the employer has the employee’s consent in writing or if the T4 can be sent electronically through a secured portal with a secured printer. Employers must issue paper T4s to any employee that requests them.
Using the CRA’s Web Forms, an employer can file up to 100 T4 slips. Employers who submit more than 100 slips will be required to file electronically via an Internet File Transfer.
To use either Web Forms or the Internet File Transfer App, you must log in with your account number and the web access code associated with that number.
Web Forms is available as of Monday, January 11, 2021.
What You Need to Know About T4s for 2020
Given that 2020 was a rather exceptional year, it should come as no surprise that there are adjustments to T4 reporting.
On top of reporting employment income in Box 14 (Code 71), all employers must use the following information codes for employment income and retroactive payments for the following time periods:
- 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
These codes will help the CRA validate payments made under the Canada Emergency Wage Subsidy (CEWS), the Canada Emergency Response Benefit (CERB), and the Canada Emergency Student Benefit (CESB).
Eligibility for CERB, CEWS, and CESB is determined by employment income over a defined period. This means that all employers should report income and any retroactive payments, including cash and non-cash taxable benefits, made during these time periods regardless of whether or not they applied for and/or received CEWS.
So, if you are reporting employment income for April 25 to May 8 but the amount was payable on May 14, you would use code 58.
If you have already filed T4 slips without this information, then you need to file amended slips. If you filed 2020 T4 slips on or before December 22, 2020, you will not be required to file an amendment.
For employees that require more than 6 “other information” codes, the CRA indicates that an additional slip should be used.
What is a T5?
A T5 is a statement of investment income. It includes income from interest, dividends, and certain foreign income. Investment income paid to non-residents of Canada does not have to be reported on a T5. It is not necessary to issue a T5 for interest earned if the amount is less than $50 (but the individual will still have to report that amount on their tax return).
T5 Due Dates
T5 slips for the previous calendar year are due to both the recipient and the CRA by the last day of February in the following calendar year. If that day falls on a Saturday, Sunday, or holiday, the slips will be due the next business day.
T5 slips for the calendar year 2020 are due on Monday, March 1, 2021.
Requirements for Filing T5s
If you are filing between 1-50 T5 slips, you are encouraged to file via Web Forms or Internet File Transfer but you can file on paper. Mail the slips to:
T5 Program
Jonquière Tax Centre
PO Box 1300 LCD Jonquière
Jonquière QC G7S 0L5
As with T4s, you can file up to 100 T5s via Web Forms. More than that, you will have to file through Internet File Transfer.
If you file one or more T5, you will be required to file a T5 summary. Only one T5 summary is required for an entire business account, meaning it is not necessary to supply a summary for each slip submitted.
It is important that you do not send a summary without T5 slips and vice versa.
You can find a complete breakdown of T5 filing methods here.
What You Need to Know About T5s
T5 slips are not as cut and dry as T4s. Here are some details that may be able to make more sense of the process.
Payments That Require a T5
If you make certain payments to a Canadian resident or receive certain types of payments as a nominee or agent for a person residing in Canada, you need to prepare a T5.
These payments include:
- Interest from one or more of the following:
- a fully registered bond or debenture
- money loaned to or on deposit with, or property of any kind placed with, a corporation, association, organization, institution, partnership, or trust
- an account with an investment dealer or broker
- an insurance policy or annuity contract (when the interest is paid by an insurer)
- an amount owing as compensation for expropriated property
- Eligible dividends and dividends other than eligible dividends (including most deemed dividends)
- Certain amounts distributed from an eligible funeral arrangement (for details, refer to Box 14).
- Amounts that have to be included in a policyholder’s income under section 12.2 of the Act
- Royalties from the use of a work, an invention, or a right of production from natural resources
- Royalties from the use of a work, an invention, or a right of production from natural resources (refer to Blended Payments for details)
- Interest that is deemed to accrue pursuant to subsection 20(14.2) of the Income Tax Act as a result of the assignment or transfer of linked notes
When is a T5 NOT Required?
A T5 is not necessary for reporting:
- Amounts paid to one recipient when the total amount for the year is less than $50
- The interest part of a blended payment made by an individual
- Interest one individual pays to another, such as interest paid on a private mortgage (this does not include investment dealers or brokers making payments for client program accounts)
- Interest paid on loans from banks, financial houses, or other institutions whose usual business includes lending money
- Capital dividends (as described here)
- Amounts paid or credited to non-residents of Canada (click here for more details)
- Interest on an investment contract accrued or payable during the year to a corporation, partnership, unit trust, or any trust of which a corporation or partnership is a beneficiary
- An amount distributed from an eligible funeral arrangement, if the amount is a return of contributions only
- Interest paid to farmers under the AgriStability and AgriInvest programs, Fund 2 (these amounts will be reported through the AGR-1 slip)
If you are uncertain about T5s and how to file them, you can talk to a professional accountant or read through the CRA’s T5 Guide – Return of Investment Income for more details.
Let Our Professionals Help with T4s and T5s
For many, the government support made available in 2020 has created a bit of confusion when it comes to income reporting. Fortunately, at WTC, our team of professionals understands the challenges faced by Canadian businesses.
If you need assistance sorting out your payroll, filing corporate taxes, or even the Underused Housing Tax, we are here to help. Our years of experience can ensure that all slips are filed accurately, helping you to avoid delays or costly penalties.
2020 was a difficult year, don’t let your tax filings get you down. Contact WTC today to find out exactly what we can do for you.