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Placement agency worker - box 81

I have an individual that received a T4 with box 81 and the related CPP and EI deductions. It looks like they work for a “client” and the agency pays the individual. So that would suggest that they are an “employee”. According to CRA’s guidance (https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/payroll-deductions-contributions/special-situations/placement-employment-agency-workers.html) this suggests that the individual is under the direction of the client, so leaning towards “employee”. So far so good…

The part I’m finding bizarre is that box 81 is supposed to be fed to the T2125 and it gets put into business income. CRA specifically says that this box does not go to employment income. That’s a bit strange given there are CPP and EI deductions (re: employment income). If that is the case do we just create a separate T2125 for this T4 income? The individual also has business income outside of this agency arrangement, but its pretty much the same activities. So does that mean there is one T2125 that captures both the T4 box 81 and the business activities since they are related.

This one is throwing me for a bit of a loop… What a strange one… Has anyone else run into this?

We have dealt with this many times. DO NOT file a T2125. That will trigger a real mess and HST issues.
We just went through a CRA ruling on these and CRA said they had to re-educate their own agents on how to handle this.

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Thanks, yes my extended question was going to relate to GST/HST which is strange and makes no sense. How are you handling the income? are you forcing it through box 14 instead so that it lands on employment income?

Guide RC4120 Placement workers and T4s.
(Particularly page 27 scenario “b” and “c”.)

The ITA is one ACT, and the EI ACT and the CPP ACT are different things, and the three do not have an exact 100% overlap.

@joe.justjoe1 - at the case I have on hand, I’m quite certain I’m in scenario b. Presumably only scenario d) can get you to business income since it’s a “contract for services”. Scenarios a through c appear to be one of employment relationship as they are under the direction of the client. Assuming we conclude that scenario b is one of employee/employer relationship and we have a T4 with box 81, it seems odd that the CRA says it doesn’t go on 10100 (employment income).


Box 81 - Placement or employment agency workers

Gross Income - See Form T2125. Do not enter this amount on line 10100 of your tax return.


Seems to me that your “worker” person is self employed for IT ACT earnings (ie no amount in Box 14)
Just not so for CPP ACT and EI ACT.

As I mentioned above, there is not an exact match between the ITA, CPPA, and EIA, hence the Code 81 indicator work-around since 2007.