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Issuing T4A without payroll account

A sole owner/director of a corporation wishes to issue a T4A to himself for fees for services (box 048) at the year end but does not have a payroll account. The T4A form seems to require a valid payer’s account number to be accepted. Is it necessary for him to get a payroll account number when there is no source deduction or employees?

Without commenting either way on appropriateness of the T4A, yes you can Netfile T4’s or T4A’s without first obtaining a Source Deductions Account. You would use the corporation’s BN followed by RP0001 as the account number to file the slips. Once the CRA receives the submission they will manually open the RP account for the corporation.

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Nope. That old style of T2124 or T2125 for management fees to avoid payroll by owner opetator was popular in 1980s. Went out the window in the 2000s. Several rulings snd tax court cases later… You must issue T4 for YE bonus or risk an even worse T4 audit ruling of monthly shareholder loan defacto payroll .

Let us compare:

T4A with Fees for Service - You pay the CPP on the fees on the personal tax return. You also incur the high risk that the CRA will initiate a Employer-Employee Determination and deny all expenses on the T2125, plus incur penalty for failure to withhold the CPP on the resulting T4.

T4 - You withhold CPP on the earnings, but you can exempt the EI if the shareholder is a majority shareholder. You are also not required to withhold tax on the employment earnings. The result is not subject to an Employer-Employee Determination, not subject to reassessment and generally is much cheaper for both corp and taxpayer.

Choose your poison…

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And let us not forget about the GST implications if ‘management fees’ are more than $30,000…

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