Top Tips for Understanding CRA Tax Slips

You don't need to understand every detail of every tax slip to file an accurate CRA tax return. However, decipherment your CRA tax slips can help you get a better idea of how much taxes are withheld, and how to reduce the taxes you owe.  Keep reading to find out our top tips on how to understand your tax slips.

What is a T4 slip?

Officially, the T4 slip is known as a Statement of Remuneration Paid. If you earned employment income at any point during the year, you can expect to receive a T4 slip from your employer either in person or in the mail. Many employers today also make their T4 slips available online.  This slip details the income you earned from a specific employer, along with any deductions, such as income tax, employment insurance, and Canada Pension Plan (CPP) contributions. If you worked for more than one employer during the year, you should receive a separate T4 slip from each one.  If you worked in Quebec, you should also receive an RL-1 slip from your employer(s). Like the T4, the RL-1 slip details your Quebec income and amounts deducted from your pay for Quebec-based programs, such as Quebec income tax and QPP contributions. Even if certain numbers may seem the same, make sure to enter the right amounts from the right RL-1 boxes on your Quebec tax return, because federal taxes and Quebec provincial taxes are calculated differently.  If you have lost or misplaced a T4 or RL-1 slip, or did not receive a slip you were expecting, get in touch with your employer.  Note that employers have until the last day of February to submit their T4s. The deadline means that you should expect to receive any slips that are coming to you by the beginning of March.  If you are registered for CRA's MyAccount for Individuals service, you may also be able to get a copy of a lost slip or slip from a previous year online.

What is the difference between a T4 and a T4A?

The T4A slip is a Statement of Pension, Retirement, Annuity, and Other Income. If you received self-employment income during the year, it would be reported on a T4A slip rather than on a T4 slip. The T4 and T4A slips look very similar, but the T4 is more detailed to account for various contributions you might have as an employee, such as union dues and employer pension plan contributions.  If you earn Old Age Security income, you may also receive a different slip, known as the T4A(OAS). If you receive Canada Pension Plan Benefits, these amounts will be detailed on a T4A(P). In most cases, you probably won't have to worry about these slips for a while.  Note that if you are self-employed, you probably won't receive a T4A from all of your clients. Usually, T4As are issued by established companies that think of you as a consultant rather than a service provider. Whether or not you receive a T4A from a client, you are required to report all self-employment and business income on Form T2125.  If you received pension or retirement income during the year, these amounts should also be reported on a T4A. The same is true for academic scholarships and bursaries. Note that amounts received for scholarships are generally not taxable. However, you must still report scholarship income on line 130 of your tax return.  In other words, the T4A provides the government with a record of money that was exchanged outside of traditional employer-employee relationships. If you are self-employed, you are responsible for paying taxes on your income. The good news is, you can claim business expenses to reduce any taxes you owe.

Self-employed or employee status?

If you are confused as far as whether you are self-employed or an employee, your tax slips can help you figure this out. Basically, if you receive a T4 with CPP/QPP and pension plan contributions and income tax withheld directly at the source, the CRA considers you to be an employee. If no taxes or contributions were withheld, you are responsible for paying these yourself and are considered self-employed in the eyes of the CRA.  Another way to look at it is to think of self-employment income as business income. Business income can come from:

 
• Profession
 
• Calling
 
• Trade
 
• Manufacture
 
• An undertaking of any kind, OR
 
• An adventure or concern of the nature trade.

If you receive a T4 at the end of the year, with CPP contributions that are matched by your employer and income tax deducted at the source, you are considered an employee in the eyes of the CRA. In most cases, you cannot deduct business expenses on your CRA tax return as an employee.  Exceptions to this rule include the GST and HST (or QST) you paid to earn employment income. This only applies if your employment contract states that you are responsible for these expenses, and you do not receive an allowance to cover them.

How to read your T4 slip

Box 14 contains the total income you earned from a specific employer during the tax year. Enter this amount on line 101 of your T1 return.  Box 16/17 is dedicated to your CPP or QPP contributions. Enter this amount on line 308 of your T1 return.  Box 18 contains your Employment Insurance premiums. Enter amounts included in this box on line 312 of your T1 return.  Box 20 is dedicated to your RPP contributions. If you made any contributions to a Registered Pension Plan set up by your employer, you can deduct these amounts on line 207 of your T1 return.  Box 22 contains the amount of income tax that was deducted from your pay. Enter this amount (including dollars and cents) on line 437 of your T1 return.

Did you receive EI or pension earnings?

Box 24 is dedicated to your insurable earnings, also known as Employment Insurance (EI). This amount is used to calculate your EI premiums, which is shown in box 18.  Box 26 contains your CPP/QPP pensionable earnings. This amount is used by your employer to calculate the CPP/QPP contributions included in Box 16 and Box 17.

Union dues, charitable donations, pension adjustments, and PPIP

Box 44 is dedicated to any union dues you had to pay. Enter this amount on line 212 of your T1 return.  Box 46 is for any charitable donations you made. Enter this amount on line 1 of Schedule 9, Donations and Gifts. For more information, go to line 349.  Box 52 is dedicated to any pension adjustments. Amounts appearing in this box do not represent income or deductions. They are used to calculate next year's RRSP/PRPP deduction limit, which will also appear on your latest notice of assessment, notice of reassessment, or T1028. Enter this amount on line 206 of your T1 return.  Box 55 is dedicated to your Provincial Parental Insurance Plan (PPIP) premiums. If you were a resident of Quebec on December 31 of the tax year, see line 375 of the tax guide for more information. If you were not a resident of Quebec on December 31 of the tax year, see line 312 for more information.  Box 56 is dedicated to PPIP insurable earnings. This box only applies to people working in Quebec. It contains the insurable earnings your employer used to calculate the PPIP premiums in Box 55.

Boxes for other information

Finally, there is an "other information" area at the bottom of the T4 slip, which is reserved for any additional information related to employment commissions, taxable allowances and benefits, deductible amounts, fishers' income, and other applicable details. For a full list of what these boxes may mean, consult the CRA.

How to read your T4A slip

Box 16 is for your pension or superannuation. If this box is filled, you may be entitled to claim up to $2,000 under the pension income amount. See line 314 of the tax guide for more information.  Box 18 is dedicated to lump-sum payments. If you received a lump-sum payment during the tax year, it would be included in this box, and you would be required to report this amount on line 130 of your T1 return.  Box 20 is for self-employment commissions. If applicable, enter your gross commissions on line 166 of your T1 return. Net commissions should go on line 139.  Box 22 is dedicated to income tax deducted at the source. If applicable, enter this amount on line 437 of your T1 return.  Box 24 is dedicated to annuities. If applicable, report this amount on line 115 of your T1 return.  Box 48 is dedicated to fees for services. If the T4A is being issued to account for self-employment income, any amounts you were paid will be printed in this box. You must report your net self-employment income on lines 135 to 143 of your T1 return.  These are the main sections of the T4A slip. Additional boxes may be included to account for a wide range of information and income sources, which you can learn about from the CRA.  When it comes to understanding your T4A slip, the most important thing to remember is that you must report all of the income you receive during the tax year. Not all income you earn will be taxable, but everything must be reported to the CRA.