Important deadlines are nearing in regard to filing taxes in Canada as a small business owner. Many small businesses depend on subcontractors to ensure operations are running at full tilt. If you are a small business owner that has used a subcontractor(s) in the last calendar year, you are required by the CRA to provide T4A or T5018 slips to these subcontractors by Monday, March 2, 2020.
Are you a small business and filing taxes in Canada? If so, this article may pertain to you!
The first week day of March marks the deadline set out by the Government of Canada and Canada Revenue Agency (CRA) to issue T4A and T5018 slips to subcontractors.
Many small businesses rely on outsourcing different areas of their business to subcontractors in order to operate at their highest potential. Depending on the business category a company falls into, will determine if a company needs to provide a T4A or T5018 slip to its subcontractors.
Subcontracting Services
- Must exceed $500 per year
- Goods only payments are not included unless a mixture between goods only payments and the total annual service component exceeds $500 annually
- All dollars and cents must be reported in CAD dollars, even if paid for in another currency
- Must complete one slip per subcontractor for the recording period
T5018s
A business will fall under the T5018 category if:
- Primary income earned for business is the result of a construction activity AND
- The business hires subcontractors for construction services
Note: Primary income equates to 50% or more of income earned for the business.
A business whose primary source of income is not construction-related but uses subcontractors in construction-related services to operate are not required to fill out or provide subcontractors a T5018 slip. I.e. A natural gas company uses subcontracts in the pipeline industry but is not required to complete the T5018 summary and slip as their primary income is gas transmissions, not constructing pipeline.
Construction activities relate to:
- Erection
- Excavation
- Installment
- Alteration
- Modification
- Repair
- Improvement
- Demolition
- Destruction
- Dismantling or
- Removal of any part of building structure, surface or sub-surface construction
Depending if the subcontractor is a resident of Canada or not will determine the slip that is required.
T4As
A business must issue a T4A to subcontractors if their business’s primary income is not a construction-related service but hires subcontractors to assist them in their operations. Some examples of these subcontracting services may include:
- Bookkeeper
- Accountant
- Social Media Manager
- Lawyer
It is important to recognize that the only subcontractors that fall under this category are those that assist in the company’s operations. If a business hires an employee(s), the employee(s) would not be considered subcontractors and therefore, would not receive a T4A slip.
It is important that CRA’s requirements are met when filing taxes in Canada and that if a business employs subcontractors—that they have issued a T5018 or T4A slip to every subcontractor in the calendar year by Monday, March 2, 2020.
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