If you’re baffled by your T4, we can help. It’s a confusing document to understand, but once you know what you’re looking at, it’ll make a lot more sense.
Employers are required to issue employees a T4 by a specific date. You’ve likely received yours recently, since the deadline this year was February 28, 2023. While you don’t technically need the paper (or online version) to file your taxes, you do need the information it includes.
Your T4 is simply a Statement of Remuneration Paid, or an accounting of the income you earned from your employer this past year. You should receive one from each employer you have (if you have multiple jobs).
But wait! Why is yours called a T4A? Don’t worry … this is just the version of a T4 that’s issued to anyone who receives income from other channels. Officially called a Statement of Pension, Retirement, Annuity, and Other Income, it notably also includes self-employed income.
Are you an employee?
For tax purposes, you’re considered an employee if you’ve been issued a T4 from your place of work that indicates Canada Pension Plan (CPP) contributions and income tax deductions. Check to see if there’s a number in boxes 16 and 22 – employees will have these boxes filled out. Employees aren’t allowed to deduct business expenses from their taxable income.
Have you received more than one T4? That’s likely just because you’ve earned employee income from multiple sources, either at different jobs, at the same job in different provinces, or by working at your company in various capacities.
Are you self-employed?
If you’re self-employed, you’ll instead be issued a T4A by each of your clients. Only those who view you as a consultant are likely to issue you a T4A. If they see you more as a service provider, you won’t receive a T4A for that income, but you’ll still be required to report it on Form T2125.
Your T4A won’t include the income tax deductions and Canada Pension Plan contributions that are on T4s. You’ll be required to pay income tax separately, if applicable. However, you can reduce the amount you owe with deductions for eligible business-related expenses.
If you receive benefits from the government, they’ll issue you T4A(P).
How to read your T4.
It looks overwhelming, but here are the key boxes you’ll want to note:
Box 14 is simply your total income, or the gross amount of money paid to you by your employer this past year, before deductions. It includes things like your salary, extra wages, bonuses, vacation pay, and tips or gratuities.
Box 16 represents your Canada Pension Plan (CPP) contributions.
Box 18 is just your Employment Insurance (EI) premiums, which are deducted from your income.
Box 22 houses the amount of income tax that has been deducted from your income. This is the federal or provincial tax your employer has withheld, on your behalf. Underwithholding can result in a balance owing.
Box 24 is your insurable earnings, up to the maximum insurable earnings for the year. The maximum amount for 2022 is $60,300. This is what’s used to calculate your EI premiums.
Box 26 has your CPP pensionable earnings. It’s used to calculate your CPP contributions.
Box 44 will have any union dues that were deducted from your income. This won’t apply if you were instead issued a receipt for union dues you were required to pay. It also does not include initiation fees or strike pay.
Box 46 includes charitable donations, if they were deducted from your earnings.
Box 52 has RPP pension adjustments, if you have a Registered Pension Plan set up by your employer.
And that’s it!
Just kidding. That’s a rundown of some of the important T4 boxes that apply to most employees, but it doesn’t give you a full picture at all about how to file your taxes (or even to read the rest of your T4). And if you received a T4A, you’ve likely already noticed that the boxes are a little different.
Understanding your T4 is an important first step, but filing your taxes is still a bit complicated. At least, it is if you really want to take advantage of all the opportunities you have to reduce your tax burden. And who wants to hand over money when they don’t have to?
If you want to file on your own, read our blog on the basics of filing your own taxes. But keep in mind that the services of an experienced tax accountant can really pay off. MMT’s team of specialized tax accountants have the knowledge and experience to file your taxes accurately, saving you time, money, and the headache of doing them on your own. We’ll also make sure you access deductions and credits, and work hard to minimize any penalties you pay.
Whether you’re filing for the first time, have a complicated tax file, or just want to spend your time on other things, contact MMT Chartered Professional Accountants. We’ll help you get your taxes done without any confusion.