I’d appreciate your guidance on a T4A Box 48 reporting situation.
My client works as a receptionist at a medical clinic and was previously treated as an employee. The employer later moved her to a “contractor” arrangement (issuing a T4A) .
My client received the T4A with income reported in Box 48 (fees for services). However, the individual works as a receptionist at a medical clinic, with duties that appear consistent with an employee-type role rather than an independent contractor arrangement. She is not registered as a business and formally registered as a business or sole proprietorship.
-Shall we continue to report her income in box 48 and fill T2125B despite she is not registered as a business or sole proprietorship? if yes 2125B/P is used, would claiming any expenses (e.g., home office or vehicle) be appropriate in this case? she works 3 days from home, and 2 days from the clinic.
-OR we report her annual income (paid monthly) in T4A box 028 or (line 13000) as other income and we don’t claim any expenses?
”I’d appreciate your guidance on a T4A Box 48 reporting situation.
My client works as a receptionist at a medical clinic and was previously treated as an employee. The employer later moved her to a “contractor” arrangement (issuing a T4A) .
My client received the T4A with income reported in Box 48 (fees for services). However, the individual works as a receptionist at a medical clinic, with duties that appear consistent with an employee-type role rather than an independent contractor arrangement. She is not registered as a business and formally registered as a business or sole proprietorship.
-Shall we continue to report her income in box 48 and fill T2125B despite she is not registered as a business or sole proprietorship? if yes 2125B/P is used, would claiming any expenses (e.g., home office or vehicle) be appropriate in this case? she works 3 days from home, and 2 days from the clinic.
-OR we report her annual income (paid monthly) in T4A box 028 or (line 13000) as other income and we don’t claim any expenses?”
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Private (especially one-sided) name-labelling does not trump tax law or employment law, so there is a problem.
No CPP/EI withheld - she may owe both portions
Since you say she was employed, and then terminated as an employee, she has a few options:
She could apply for EI
Service Canada may review status - Can trigger a ruling that she was actually an employee
Request a CRA ruling - File Form CPT1 with the Canada Revenue Agency:
CRA will officially determine employee vs contractor
Employment standards complaint - Through the provincial authority (Employment Standards Branch): claim unpaid vacation pay, stat holidays, termination pay; they assess true employment status
Civil action - Sue for wrongful dismissal / unpaid entitlements
Courts often reject “contractor” labels if facts don’t support them
Before tax filing, she needs to request this (CPT1):
By accepting the new arrangement, she has effectively become self-employed. Not sure what province you are in, but in Saskatchewan a person does not have to “register as a business or sole prop” unless the business is using a name other than their own personal name.
As noted by @abechew309 , the employer cannot legally force her to do this, and for tax purposes, CRA and/or the TCC would look at the balance of facts to determine whether the situation was employment or self-employment. But, one of those facts is whether both parties INTENDED the arrangement to be self-employment/contract work. From what you’ve described, it sounds like there was no mutual agreement to that arrangement.
Before doing her taxes, I suggest you discuss the legal issues with her, and ensure she understands the ramifications. If she really wanted to be considered self-employed, and is prepared to do all the other things that prove she is self-employed, report it as such.
In any case I would not report the income as box 28 if the slip was issued showing the income in box 48. When you do that, CRA’s automated system will think it is an additional slip, and will flag the originally issued slip as “unreported”. Then, if your client doesn’t respond to the inevitable CRA review, that income will be added to her taxes as well (i.e. doubling the income, and causing additional tax payable, etc).
IF she is self employed, she will be paying the employer share of CPP, foregoing EI and losing vacation pay. IF she is self employed she is entitled to expense her mileage to work, and claim home office expenses.
However, IF she is only working for this one business, and with the circumstances you describe, I highly doubt that she is self employed. It is an attempt to transfer costs from the employer to the employee. It is not a good situation for the employee. Without using the law, she loses. And by using the law, she probably loses as well.
CPP/EI ruling first…there is virtually NO circumstance in which a “receptionist” could be a “contractor” unless the entire arrangement is virtual. If she is in the same chair, uising the same equipment and answering the same phone/door as previously she remains an employee.
Get a ruliing AND, if necessary, note that as a “contractor” she also loses the protections of the province’s Employment Standards legislation.
An emplyoee CAN NOT contract out of rights, nor can an employer do so.
The tax reporting is not the issue here…it is the employer’s attempt to “not pay” legitimate costs associated with having an employee (CPP, EI, Vacation, General Holidays and Severance…among others). Deal with that first.
She is in Ontario and she had to accept this arrangement to keep her job. She is paid minimum wage too.
We will keep Box 48 and file using Form T2125B. In Ontario, does she need to have a registered business or an Ontario sole proprietorship, or is it acceptable to use her personal name as the business name?
It is perfectly acceptable to use her own name and she does not need to register as a business. But under these circumstances, she should certainly claim her mileage to and from the clinic, as well as any other legitimate expenses such as a dedicated home office space. If she is questioned in an audit, she need only indicate that this was not of her choosing. She is being abused and should get out of that situation sooner rather than later. It is a case of “I guess she’s making the best of a bad situation, don’t wanna make waves, don’t you see?”
And if she earns over $30,000 gross in this new arrangement, she must register for HST, charge the clinic HST on her “fees”, claim HST on her costs and remit the tax. @jacklo, if you are not comfortable with the HST bit, I would be heppy to guide this person in getting set up for HST at no charge..
In that case, T4, Box 14
Clearly, on this information she is an employee, and the correct slip is a T4.
The employer needs to amend and cancel the so-called T4A, and issue a correct T4, and the wage amount should be in Box 14 of the T4, and not anywhere on a T4A.
Hopefully the employer has a qualified CPA for their own books, who knows the consequences of incorrect/false T-slip reporting.
Do you have a a copy duly executed written Employment contract? Of a duly executed any sort of contract? Of any Employment termination records? Of any payout of severance and vacation pay if she was ever terminated from payroll? Of any duly executed contracts with any businesses? Has she been asked to provide documentation that she has? That the payor has? Anything that substantiates the (weird) position that they are asking you to participate in?
You already have stated that she came to you as a receptionist, and therefore you would have asked her for a copy of her T4.
You did not say that she came to you saying that she was a business person, and provided you with her full accounting business records as required by Section 230 of the Income Tax Act.
Attempting to take any deductions not specifically permitted for a T4 wage person is asking for significant trouble, IMHO.
Also, you say she was “previously treated as” an employee- when was that? Also 2025? then where is that T4 and layoff documentation? Termination without cause? Mandated severance?
I understand this…and it still stinks of employer coercion, with various unpleasant repercussions for all involved.
It depends on how long she was an (actual) employee there as to whether it’s worth it to quit and sue for wrongful dismissal, as well as to put in a CPP/EI Determination claim with CRA and a concurrent complaint with Employment Standards. It’s amazing that even “suggesting” to her “employer” that she would do all of these might trigger some embarassment on their part and a return to proper employment. Keeping a minimum wage job in which your status is abused is not likely worth it.
Your job is not to go along with it without question, but to provide the options to her. She is NOT truly self-employed and is NOT entitled to any expenses or treatment “as if” she were.
I get the frustration…but it’s simply wrong to provide counsel that is also wrong.
I totally get what you are saying @SmallBizGuy but I do not back down on what I have said. If she chooses not to take the legal options, she can at least take the advantage of the working from home benefits. If she files the T4A and earns over $30,000 (which is highly unlikely) then she must charge the HST on her income. And now back to something which actually pays me. But I think her employer is at minimum SCUM!
LOL - by the time she charges the doctors HST…they might as well have her as an employee, because the costs will be just about the same after vacation, CPP, EI and Stats.
Not sure there is the talk of registered or not, we all know one can not simply say I am an employee or self employee, say, the tax payer, legally registered as self employed, or incorproated a business, that still doesn’t mean she is operating a busienss. Given the facts mentioned, there is no way the receptionists is running a business, based on what we know about ITA, while you feel bad for her, maybe the employer is forcing her to do that, but by helping her filing a return as business, claiming deductions, anyone would have suspected that’s not legal
It’s all fine talking from our ivory towers as CPAs, but what should the woman do? Have any of you recently tried living with minimum wage income? Or given up the minimum wage job you have, when you have no hope for anything else? Some people want to work, not be on the welfare roles. I remain willing to help.
Instead of helping her to do her return, there maybe other things we can do, like filing a complaint to CRA, helping her to filing a complaint to labour branch, wasting lots of time, but should be the better way to deal with it. Of course, you are going to say, she is going to lose her job, but
I don’t (and didn’t) disagree. That doesn’t make it right though…and, given that this is a MEDICAL clinic, there is likely no shortage of income. If they’re breaking tax rules, my bet would be they’re breaking others too. One could (not saying whom) make an anonymous “tip” to CRA…they’ll be happy to oblige with a payroll audit that “appears random”. They might proceed with other audits too.
She files s/e for the time being and when she gets her CRA-prepared T4 refiles, and gets a refund of the overpaid CPP, net of some EI…and returns to the protection of Employment Standards and EI.
It’s actually fine how others do things, I don’t judge, but whoever doing things, shouldn’t justifying their own action. Say, you feel for the lady, file the return for her because her employer reused to issue the T4, changing her to self employed, but now, seems like we are talking about filing for her as business? claiming deduction? Are we trying o justifying something here?
@RRAccounting Whatever. @Jacklo has wisely left this discussion a long time ago. We are just wasting time - it is all hypothetical - you and I are not filing these taxes.
No I didn’t leave this chat. I was just busy with the tax season and my other clients.
Folks, all your input is great, and I really appreciate the insights.
I spoke with her, she said she get to work from home 3 days a week. The market is bad for job seekers nowadays, and she thinks challenging her employer would hurt her job longevity.
She just needs her taxes filed for this 2025 and she will talk to her employer about converting her back as FTE.
Now, shall we proceed with 2125B/P? Can we claim driving back and forth from the medical office business mileage? What about home office and Internet/Mobile?
My comment would to only claim expenses on the T2125 you could as an employee: limited home expenses (heat and electricy and internet) and NO commuting. Eventually this employer will be caught by CRA and will be forced to issue T4 and be penalized for not withholding source deductions; then your client will not need to reverse any expenses you otherwise may have claimed such as all home expenses (business use of home) and inappropriate vehicle claims.