Hi everyone, I recently took over a client who’s a real estate brokerage. I found that the previous accountant issued T4As to PRECs. My understanding is that PREC is a corporation so if we pay commissions or service fee to a PREC, there’s no requirements for filing T4As for them. Is that correct? I’m trying to find any info that specifically excludes corporations but couldn’t find any. Many thanks in advance!
I had never heard of a PREC, but a quick internet search reveals it is something specific to Ontario. From what I can tell, it’s just a term used by Ontario realtors and the Real Estate Council of Ontario. Which means, “PREC” is not a specific tax term, and does not reflect any specific type of corporation legally - it could be a CCPC or prof corp or whatever.
T4A slips are required for all “fees for service” paid by any business to any service provider - as specified in section 200 of the ITR. However, CRA has held a moratorium on enforcing that regulation for decades. This year, they are starting to enforce such T4A filing for truck drivers only. (maybe next year they will start enforcing other sectors…?)
So, bottom line, it doesn’t matter if the corp is a PREC or not.
You should resign from this engagement, unless you are comfortable keep on doing whatever was done, it was probably not the previous accountant, it was the owner of the business that decided on that. It’s going to be a mess
A PREC is Personal Real Estate Corporation. In fall of 2020 the Ontario government passed legislation allowing real estate agents to incorporate a PREC, thus allowing them to take advantage of the tax planning and savings that CCPC’s have. I have a number of PREC clients and some get a T4A and some don’t. Because the T4A is reported on calendar year earnings, it may not useful for a PREC whose year end is not December 31. In these situations we request the PREC obtain a copy of the detailed Earnings Tax Worksheet for the fiscal year from the brokerage that provides the sales and HST information. This serves as the source document for sales reporting for the PREC year end.
Thank you! I’m in BC, we do send earning summaries to the PRECs when requested as they have different year ends. I will contact CRA about the T4A filing as well.
The T4A is not uncommon - I just look at it as a backup for what I have already determined is the client’s income. No need to fear the engagement.
T4A is not uncommon, but we are talking about PREC, issuing T4A to PREC owner, family member, without source deductions, and I am guessing PREC to client referral, that’s fine, but definitely, not family members, or owner
I am also talking about the PREC - in my case the brokerage is issuing the T4A to the owner of the PREC.
I am not positive but you may have interpreted the post incorrectly. I believe they were saying the brokerage issuing T4A’s to the PREC’s that work under that brokerage as opposed to PREC’s issuing T4A’s to contractor/employees?
If we were to issues T4A’s as seem to be required, the PERC would also have to issue T4A’s to contractors; support personnel who work for various agents working out of the same brokerage.
The scenario is - the sales agent incorporated a PREC and gets commissions from the brokerage through PREC. Does the brokerage issue T4A to the PREC? I might have mis-interpreted something before as I was under the impression that T4A is for individual/self-employed only, not corporations…
Apparently some brokerages issue T4As to PERCs and some don’t. A PERC is a special type of corporation, and for my client, it really does not make a difference if she receives a T4A or not. The T4A matches the other records she receives from the brokerage so it’s not a big deal. I just review the T4A to see that it does in fact match.
My bad, I am only dealing with individual PREC, not the brokerage firm that usually in the range of millions of commissions to other PREC, it seems very common for PREC to issue T4A as rebae/commissions to client referral, and the small PREC that asked for help, all followed the same patter, issue T4A for payments, to everyone, including to themselves, family, and of course, other PREC that’s related. Maye this is a big brokerage firm that’s not related to that
Yes, correct. The question is – if the brokerage paid the PREC, is the brokerage obligated to issue T4A to the PREC?
I have a few real estate broker clients. They all issue T4As to individual and PREC agents. I’m not sure if it’s required but these people are all used to getting their commission income reported that way. It doesn’t hurt and CRA probably prefers it that way.
Real estate agents, as a group, tend to be non-conformists in the record-keeping category. I appreciate a broker who issues them a T4A.
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Who else would be the one issuing the T4A? Those who do issue T4As are doing their due diligence. Those who don’t may be found at fault for not doing so (if CRA ever answer our questions about T4A issuing.)
Yes - per the ITR, but again, CRA has not been enforcing this particular regulation for decades. So, when you ask, “is it required” or “is my client obligated” the answer is not straight-forward. Technically the law states that T4A returns are required to be filed (and T4A slips issued), but since CRA is not enforcing that law, 99% of “required T4As” are not being prepared/filed (to report box 48 - fees for service).
In practice, I recommend that clients prepare and file T4A slips if they use contractors who they suspect may not be properly reporting their income. This ensures that YOUR client can prove to CRA that such expenses were legitimately incurred, and that all regulations were followed. But, if your client’s suppliers and contractors are issuing proper invoices (to your client), and you’re reasonably confident that those suppliers/contractors are doing proper bookkeeping and tax filing, your client probably doesn’t need to issue T4A slips.