Danielle Kubes is a trained journalist and investor who has written about personal finance for the past six years. Her writing has been published in The Globe and Mail, National Post, MoneySense, Vice and RateHub.ca. Danielle writes about investing and personal finance for Wealthsimple. She has a Bachelor of Humanities from Carleton University and a Master of Journalism from Ryerson University.
In order for the CRA to calculate how much taxes you owe it first needs to determine not only how much income you made, but what kind of income you made. And there are lot of types of income. As Cicero, the famed Roman orator said,
“We are taxed in our bread and our wine, in our incomes and our investments, on our land and on our property…”
Each category of income has its own personalized statement that you and the CRA receive by February of the following year. This statement details the gross amount of money you were paid and any deductions made at the source, such as tax already collected, contributions to Employment Insurance, Canada Pension Plan or union dues. These statements are called T-slips and are prepared by payers such as your employer, financial institutions, government departments or pension administrators.
There are many categories and subcategories of T slip: T5 slips detail investment income; T3 slips detail trust income; and RC slips detail income from various government benefit programs, such as the Universal Child Care Benefit and the Canada Worker’s Benefit. The most common kinds of slips, however, are T4 slips.Easy, fast, and even fun. SimpleTax is CRA-certified tax software that you’ll actually want to use. And you only pay what you want, no catch — get started.
When is a T4 slip issued
T4 slips have seven variations:
T4: paid from your employer
T4A: pension, retirement, annuity and any other income
T4A (OAS): Old Age Security income
T4A §: Canada Pension Plan income
T4E: Employment Insurance income
T4RIF: Withdrawals from a Registered Retirement Income Fund
T4RSP: Withdrawals from an RRSP
We’re going to focus on the second category: T4A slips.
What is a T4A?
The kind of income that is recorded on a T4A slip is extremely broad—the CRA basically throws in all kinds of “other” income that its not sure what to do with. If you’re freelancing for an organization, for example, it may choose to issue a T4A stating what it paid you throughout the year. Or if you receive an inheritance that income may also be declared by means of a T4A slip. Or if you’re a scientist and you get a research grant, that money will be recorded here.
These are some of the types of income that may be reported on a T4A slip:
Scholarships, bursaries, or research grants
Some self-employment income that total over $500
Withdrawals from RDSPs, RESPS and RRSPs
Tax deferred cooperative shares
Indian exempt income (the CRA uses the term “Indian” because of its legal meaning in the Indian Act)
Some cash awards
Tuition assistance for adult basic education
Types of income not report on a T4A slip:
Income from a Crown corporation
Construction contract income
Income to a non-resident of Canada
Income from a Life Income Fund (LIF)
Maternity leave or parental leave top-ups amount
CPP, OAS, EI and RIF withdrawals, which are all reported on their own specific subcategories of T4 slips—see the numbered list above
How to report a T4A
Reporting a T4A slip is identical to reporting income on any other kind of slip.
You’ll probably get a T4A slip, if applicable, by the end of February of the following year. The CRA also gets a copy. It’s normal to get multiple T4A slips if you have multiple streams of income.
Most of the income stated on your T4A slips will be taxed at your marginal rate. Unlike a T4 slip, it’s rare that any tax was deducted at the source so it’s likely that you will owe taxes for the income. You were responsible for estimating and setting aside the appropriate amount of income tax throughout the year, as you received that income.
Some kinds of income, however, may be tax-exempt, or, in the case of self-employment income, you may be able to deduct eligible business expenses. If you suspect this is the case, ask a qualified accountant or call the CRA to confirm.
The most common example of exempt income is scholarship money, or OSAP grants for full-time post-secondary students. This income will probably be reported in box 105 on the slip. Box 105 states your scholarship, bursary, fellowship, grant or prize income. Scholarships are tax-exempt for elementary, secondary school and for full-time students at a post-secondary institution. Up to $500 for part-time students is tax-exempt. Post-doctoral fellowships are fully taxable. Call the CRA or ask a qualified accountant to check how much of this income you must report.
If you are doing your taxes by yourself using tax software then the software will likely automatically import all the information from all your T-slips from the CRA. Otherwise, you can just fill out the information yourself. The slips make it easy because the boxes are all numbered—simply type the information in each box to the corresponding one on your tax software. (If you lose your paper copy, a backup is available by clicking on My Account on the CRA website).
How to fill out form T4A
So far, we’ve just been discussing receiving a T4A slip. But what if you have to issue one?
If you paid out any of the kinds of income that belongs on a T4A slip and it totals more than $500 in a calendar year, then you will need to fill out a T4A slip and send it to the payee and the CRA. Common payers include employers, trustees, estate executors, liquidators, administrators, or corporate directors.
Luckily, the slip is clear and easy to fill out—it is divided into numbered boxes that each serve a specific purpose. These boxes include:
Recipient’s name and address, social insurance number
Amount paid in dollar and cents (reported in Canadian currency, even if they were paid in another currency
Income tax deducted if any
At the bottom of the slip is an “Other information” area. Here you fill out the appropriate code that designates what kind of income it is. Veteran benefits, for example, are reported with Code 127 and a cash prize is Code 154.
Looking up the code may also give you more information on the details you need to include.
Starting in 2020, you can file a T4A electronically. Otherwise you must mail it in.
What is a T4A summary?
In short, a T4A is a statement of “other” income that you must report to the CRA and pay appropriate taxes on. It differs from a T4 in that it is not merely income earned through employment, and differs from T5s in that it is also not investment income. Common kinds of income reported on a T4 include pensions, annuities, scholarships, registered account withdrawals, and some self-employment income.