T4 vs T4A: Which Slip Do You Issue to Your Workers in Canada?

Two Slips, Two Completely Different Tax Relationships

Every February, Canadian businesses face the same year-end task: matching every person they paid during the year to the correct CRA information slip. Get it wrong, and you are not just looking at an administrative inconvenience—you are looking at amended filings, payroll discrepancy letters from the CRA, frustrated workers who cannot file their own taxes on time, and in worse cases, a worker reclassification that triggers backdated CPP, EI contributions, penalties, and interest.

The core distinction sounds simple: employees get a T4. Contractors and other non-employment income recipients get a T4A. In practice, the harder question is not which slip to issue once you know someone's status—it is correctly determining that status in the first place, especially for long-term contractors, family members on the payroll, or workers whose role has evolved over time.

What a T4 Actually Reports

A T4 (Statement of Remuneration Paid) is issued by every employer who paid employment income during the calendar year and remitted payroll deductions to the CRA on the worker's behalf. It covers salaries, wages, bonuses, commissions, and taxable benefits—paid through a structured payroll process with regular deposits and deductions withheld at source. Critically, a T4 also reports everything the employer withheld and remitted on the employee's behalf: CPP contributions, EI premiums, and income tax. If someone worked for you in more than one province or territory during the year, you must complete a separate T4 for each province or territory they worked in—a detail that catches employers with mobile or multi-location staff off guard. If an employee worked for multiple employers during the year, they will receive one T4 from each employer—there is no consolidation across employers; each issues their own.

What a T4A Actually Reports

A T4A (Statement of Pension, Retirement, Annuity, and Other Income) is a genuine catch-all, covering a much wider range of payment types than its name initially suggests. For most businesses working with contractors, the relevant boxes are: Box 048 - Fees for services: payments to contractors, consultants, and freelancers for work performed. Box 020 - Self-employed commissions: commissions paid to an independent sales agent or broker who is not an employee. Beyond contractor payments, the T4A also covers pension and annuity payments (including Old Age Security recipients), scholarships, bursaries, and fellowships, research grants, and various other non-employment income types. Unlike a T4, no payroll deductions are typically withheld on T4A income—the recipient is generally responsible for calculating and remitting their own income tax and, if self-employed, their own CPP contributions. When a contractor receives a T4A, they typically report that income using Form T2125 on their personal tax return, which also lets them claim eligible business expenses against it—something a T4 employee generally cannot do with their employment income.

The $500 Threshold for Contractor T4As

Under CRA's administrative policy, you generally need to issue a T4A to a contractor if your total payments to them during the calendar year exceed $500. This is a cumulative annual threshold across every invoice, not a per-payment trigger—a common mistake is tracking individual contractor invoices without summing them across the year, then being surprised at year-end that several smaller payments collectively crossed $500. Build the habit of tracking contractor payments as you go through the year, rather than reconstructing twelve months of invoices in a scramble during the last week of February.

The Real Decision: Who Controls the Work?

The choice between T4 and T4A is not really a paperwork decision—it is a direct reflection of an underlying legal classification question the CRA takes seriously: is this person genuinely an employee, or genuinely an independent contractor? A handful of practical questions help clarify which side of the line a worker falls on: Does the worker follow your internal processes, schedules, and supervision, or do they set their own hours and methods? Do they use your equipment and workspace, or their own? Do they work exclusively for you, or do they invoice multiple clients? Is the relationship ongoing and indefinite, or tied to a specific project with a defined end? Could they realize a profit or loss based on how efficiently they manage the work (a hallmark of running their own business)? A barista working regular weekly shifts, using your equipment, following your processes, and paid biweekly is a textbook employee relationship—a T4 is correct regardless of what any contract between you might say. A freelance videographer who brings their own equipment, sets their own schedule, and invoices you for a defined project is a textbook contractor relationship—a T4A is correct. The label in a contract does not override the substance of the actual working relationship. Calling someone a contractor in a written agreement does not make them one if the day-to-day reality looks like employment.

Conclusion: Get Worker Classification Right

Worker classification carries real financial weight, and the right call is not always obvious—particularly for long-term contractors, family employment arrangements, or businesses scaling quickly with a mix of payroll and contractor relationships. Consider professional guidance if you are unsure about a specific worker's classification, if you have recently received a CRA discrepancy letter, if your business operates in construction and needs clarity on T5018 versus T4A obligations, or if you want a full review of your worker classifications before this year's February filing deadline.

If you would like help reviewing your worker classifications or preparing accurate year-end T4 and T4A filings, our team at CA-Sir works with Canadian businesses on payroll compliance year-round. Contact us today to book a consultation.