Client is an insurance agent who received a T4 from the company A. Company B provided the client with a T4A slip. Company A and B are both insurance companies. Client advised T4 offset T4A because the company B is required to issue it. T4 amount is higher than T4A. T4 commission box 42 -commission income is $40K less than T4A box 20 -self-employed commission.
In prior years, tax preparer recorded the T4 and T4A on the tax return. The T4A was reported on T2125 as income and an offset expense for the same amount as income, resulting in zero commission. Client has no other expenses. Client is taxed on T4 slip only.
Have you had a similar situation? Were the prior year recorded correctly?
Very fishy. The T4 and T4A would be reporting different income so while there could be actual offsetting expenses it would not simply be a plug to cancel the T4A out as seems to have been done here.
Why would one slip cancel out the other? Are they not two different insurance companies? Seems to me that the client earned separate commissions from both and should be taxed as such.
Perhaps you can review pay stubs to see how much in total the client actually received.
CRA’s matching department won’t offset it when they do their thing starting in the Fall. You can’t fix it at your end. He’s the only one who can fix it but report what is on the slips. It can be changed/amended when he deals with it.
Sounds like one of those situations where the client doesn’t really understand his taxes, but you don’t have enough information to figure out what’s really going on. I’d ask to see the prior year tax return, and ask about related expenses deductible from self-employment income. Perhaps the T4 is for taxable benefits only, and the self-employment expenses happen to be about the same amount. May be some other plausible explanation. You might just have to do some digging.