Just an update. I spoke with CRA agent just now on T4 and A/R situation. Agent told me these are two different things. I can issue a 2022-T4 even though there was no remittances sent in 2022. The only thing would be that they have to pay hefty charges for late remittances and if they are willing T4 can be filed. Revenues are not relevant for T4 purposes. I know @Nezzer you said the same thing. Thanks.
[quote=“irfan, post:22, topic:6588”]
I spoke with CRA agent just now on T4 and A/R situation. Agent told me these are two different things.
"I spoke with CRA agent just now on T4 and A/R situation. Agent told me these are two different things. " “I can issue a 2022-T4”
.
.
.
So you are absolutely SURE that a CRA agent told you to make up fictitious figures on a T4 and facilitate an ITA S239 Offence
[“is guilty of an offence and, in addition to any penalty otherwise provided, is liable on summary conviction to (f) a fine of not less than 50%, and not more than 200%, of the amount of the tax that was sought to be evaded, or (g) both the fine described in paragraph 239(1)(f) and imprisonment for a term not exceeding 2 years.”]
and a Criminal Code S380 Offence
[“(b) is guilty (i) of an indictable offence and is liable to imprisonment for a term not exceeding two years, or (ii) of an offence punishable on summary conviction, where the value of the subject-matter of the offence does not exceed five thousand dollars.”]
.
.
.
Ok, if you say so…
Hi @joe.justjoe1, I greatly appreciate your perspective. However, this is my real conversation with CRA agent today. I explained the situation that company owner was not on payroll in 2022. At year-end the owner decided not take dividends but rather salary from his company. Can I issue a T4 now. The answer was Yes. I asked very clearly, is there anything wrong in doing this. The answer was Not at all except paying remittances along with penalties. She also explained that the revenues and T4 are completely separate from each other. I guess, this is a good learning curve for me.
I would be careful relying on conversations with CRA phone agents.
1 Like
IMHO you need to refer this to a CPA.
Note that ignorance of the law is not a defense when charges are laid. (And also when the civil lawsuits are filed).
This taxpayer has not taken his info to a qualified professional for a reason. They are intentionally bypassing scrutiny and making sure some other sucker becomes the “fall-guy” when charges are laid.
You want to rely on that CRA agent? - Get them to write you a signed written letter instructing you to create fictitious T4s contrary to aforementioned ITA S239 and CC S380…
To add to the complexity, use the “purpose test”. What is the purpose behind issuing a late T4 – when the income could easily be shown as a dividend (owner / manager). If the purpose is other than legitimate, should one proceed? CRA is being technical and says that anyone can file a late T4 (and pay the penalty). But the purpose? Hmm…
Atul
1 Like
Why would CRA care? The client is not trying to defraud THEM. The client is trying to defraud the BANK (i.e. to qualify for a mortgage). If you call the client’s bank and tell them what is really going on, I think the bank would deny the mortgage. The bank could also contact the RCMP and insist your client be charged with fraud for TRYING to get a mortgage based on false documents. The RCMP could also charge your boss and/or your firm for aiding the client in trying to defraud them.
1 Like
I agree with Nezzer. Though there is nothing technically wrong with issuing a T4 for an Annual Salary, I do that with some of my clients when we get to the year end and see what, with hindsight, the company can pay. However, I would never participate in something that is fraudulent, I would fire the client and I’d tell them why. I wouldn’t have anyone think I would condone attempted fraud.
1 Like
@irfan I don’t know who you work for but I would suggest a few things to be aware of, and having a good sit-down conversation with your superior would be a good idea as well.
-
There is nothing inherently wrong in determining - at the end of the year - that ACTUAL payments made to a SHAREHOLDER (yes, make sure the person is one, and that there are no other holders of shares in the same class, which is usually the case for small businesses…but not always) are to be booked as salary vs dividend.
-
Yes, if they are salary, you will need to calculate CPP on the payments (but no tax need be calculated for T4 filing) and then file showing the gross, and the CPP exigible. Penalties will be applied on the unremitted CPP. That’s the client’s problem, not yours.
-
Your position is to ensure that the payments WERE made to the individual…not simply journalled. If they are dividends instead of salary then you also should mention that they need to be supported by (a) written dividend resolution(s).
Ignore the fluff around the invoicing and the A/R - that’s not relevant. If the client is stupid enough to earn only a small amount of income and tax himself on a large amount…again, that’s his problem as long as it has been made clear to him how stupid he’s being. (Yes, I’ve had a client that did that in the past.) There is nothing illegal or improper about doing so…but it’s still “mostly stupid”, with rare exceptions.
It is the BANK’s responsibility to determine the utility of the T4 or T5. If they know the client is the owner-operator they’ll request F/S for the corporation…if they don’t, that is their problem…again, not yours. If they do, and see $100 of income and $100,000 in salary…they’ll be asking questions of the client.
1 Like