Around February 20th of this year, when you receive last year’s T4, you will need to take note of a few different pieces of information.
The Layout of this Key Tax Document
In the top left corner of your T4 statement paper, you will see our recruiting agency’s name (RPI Consulting Group Inc). At the top of the slip will be the tax year that the document is for (2019 in this case). Below our recruiting agency name will be your social insurance number (box 12). Just below that will be your full name and address. This is all here to confirm that the T4 is indeed yours.
What you then need to draw your attention to is box 14. Usually, this is where most people look to see how much they earned from an employer. However, we are not a standard employer; we are a staffing/recruitment agency. Box 14 will just have “0” inside. This is not a mistake!
Instead, your total earnings for the last year with RPI Consulting Group Inc. will be shown in another box, box 81. Box 81 is for what the Canada Revenue Agency classifies as “agency workers.” On your return slip, this total earnings amount will appear on line 300.
What About Source Deductions and Income Tax?
Deductions that we have made for CPP and EI from your earnings will be shown below box 14, however. Box 15 is for Canada Pension Plan deductions and box 24 is for EI insurable earnings deductions. We have dealt with these deductions for you.
However, it is very important that you put aside a portion of your own earnings to pay for income tax. From the very beginning of your work with RPI Consulting Group Inc, as a worker, you are required to calculate and put aside money to pay the CRA from all of your earnings as an independent contractor. This includes your pharmacy/healthcare work for us.
Making Sense of Your Tax Filing Obligations
For maximum clarity on all of this, we recommend that you take a look at the Canada Revenue Agency’s document called “Employers’ Guide: Payroll Deductions and Remittances.”
Page 47, under the section titled “Placement and employment agency workers”, says:
“b) When an agency places workers in an employment under the direction and control of a client of the agency and the agency pays the worker, the agency has to deduct CPP contributions and EI premiums, but not income tax. The agency has to prepare a T4 slip for the worker.”
It goes on further to say “The gross earnings of workers described in paragraphs b) and c) must be reported on their T4 slip. For reporting instructions, see Guide RC4120, Employers’ Guide – Filing the T4 Slip and Summary.”
In Guide RC4120, under “Code 81”, the explanation is as follows: “In the “Other information” area at the bottom of the T4 slip, use code 81 for scenarios “b” and “c” and enter the gross earnings of placement and employment agency workers. Once again, healthcare/pharmacy personnel hired through us should look for their earnings on Box 81.
What to Do With This Information
Agency workers can take the amount from Box 81 of their T4 and transfer it to their self-employed income return to write off business expenses incurred during your pharmacy work. Examples of business expenses include maintenance of your pharmacist’s lab coat and fuelling/operating your vehicle. Just remember to keep all of your receipts so that you can prove these expenses, in case you are audited by the CRA.