Placement and employment agency workers have unique reporting requirements on their T4 slips. While gross earnings are generally reported on a T4 for these workers:
Reporting in Box 81
- Earnings are reported specifically in Box 81 of the T4 slip.
- Box 81 is designated solely for reporting gross earnings from placement or employment agencies.
- This separate reporting helps distinguish between traditional employment income and income that is treated as self-employment for tax purposes.
How to Report the Income:
- Report the Box 81 amount on Form T2125 (Statement of Business Activities).
- This form is used to calculate your self-employment income and expenses.
- The form must be submitted with your T1 General Income Tax and Benefit Return.
CPP and EI Deductions:
- The placement agency is required to deduct CPP (Canada Pension Plan) contributions and EI (Employment Insurance) premiums from these earnings, even though the income is treated as self-employment for tax purposes.
- This creates a unique situation where you are considered self-employed for income tax purposes but treated as an employee for CPP and EI.
Expenses That Can Be Claimed:
You can claim various expenses related to your work as a placement or employment agency worker:
- Home Office Expenses: A portion of your rent, utilities, insurance, and maintenance costs if you use part of your home for work.
- Vehicle Expenses: Fuel, maintenance, insurance, depreciation costs for the vehicle used for work, as well as parking fees and tolls related to work.
- Equipment & Supplies: Computer equipment and software used for work, office supplies (e.g., stationery), and any work-specific tools or equipment.
- Professional Fees: Accounting or legal fees related to your work.
- Telephone or Internet Expenses: Costs related to telephone or internet services used for work purposes.
You can also claim other expenses that are work-related but not specifically mentioned above.
GST/HST Registration:
Income reported in Box 81 is generally considered self-employment income for tax purposes, despite having CPP and EI deductions. The requirement to register for GST/HST is typically based on your overall taxable income.
You are required to register for GST/HST if your total worldwide taxable income exceeds $30,000 in a year, with some exceptions (e.g., financial services, goodwill provisions, or capital property sales).
Collecting and Reporting GST/HST:
- If you register for GST/HST, you must charge GST/HST on the income reported in Box 81 of your T4, unless exempted.
- Once registered, you can also claim an Input Tax Credit (ITC) for eligible work-related expenses associated with your income in Box 81.
- After registering, you will need to file regular GST/HST returns, either annually or quarterly, depending on your business's reporting requirements.
Posted on 14 November 2024