CRA ISSUES CLARIFICATION ON T4A REPORTING REQUIREMENTS
Requirement to Report Payments to Service Providers for U.S. Companies
U.S. companies that operate in Canada must be aware of their reporting requirements in Canada. Most U.S. companies are familiar with the requirement to report payments to U.S. based service providers through form 1099-MISC. Canada has a comparable service payment reporting requirement, known as the T4A slip/return.
Historically, T4A reporting in Canada has not been wide spread, likely due to the lack of Canada Revenue Agency (CRA) scrutiny in this area and the ambiguity around related CRA guidelines. Improper or non-filing of T4As has not been an area in which CRA auditors have typically raised concern or assessed penalties. Ambiguity in its own T4A guide, where CRA states “Do not report payments to fees for services under code 028. These payments should be reported in box 48. The CRA is not assessing penalties for failures relating to completion of box 048”, also led many practitioners to assume that CRA did not require T4A reporting for payments to service providers.
Recently, CRA clarified its position on this subject and confirmed that T4A reporting of service payments is mandatory and penalties will be assessed for failure to file T4A slips. Penalties increase depending on the number of unfiled or late filed slips and additional penalties apply for failure to file the T4A slips electronically if you have more than 50 slips to file.
U.S. and Canadian companies alike should take note of this clarification of position and ensure they comply with the T4A reporting requirements. This may mean implementing new procedures to track the information required to file T4A slips going forward. Completion of T4A slips requires the following information: the service providers name, address, and CRA-issued business number, as well as the total amount paid during the calendar year (excluding GST/HST). Amounts paid are to be reported in Canadian dollars. T4A slips/return must be filed by February 28 following the end of the calendar year in which payments to service providers are made.
For more information or for assistance with your reporting requirements, contact us.