The T4 and the T4A are both year-end income slips issued by Canadian payers, but they mark two very different working relationships. A T4 (Statement of Remuneration Paid) goes to an employee whose payer has been withholding income tax, Canada Pension Plan contributions, and Employment Insurance premiums from every paycheque. A T4A (Statement of Pension, Retirement, Annuity, and Other Income) goes to an independent contractor who was paid the full gross amount and is responsible for handling their own tax, CPP, and any EI coverage. If you’re trying to figure out which slip should apply to you in Canada, the answer turns on whether you’re an employee or a self-employed contractor under the Canada Revenue Agency’s rules — and the choice carries consequences well beyond the slip itself.
Who Gets a T4 and Who Gets a T4A
The CRA looks past what the contract calls you and examines how the work actually happens. Guide RC4110 sets out the framework, distinguishing a “contract of service” (employment, T4) from a “contract for services” (independent business, T4A).1Canada Revenue Agency. Employee or Self-employed The starting point is what both sides intended, tested against the economic reality.
Four factors do most of the work:
- Control. If the payer decides what gets done, how, and when, that points to employment. A worker who sets their own hours, chooses their methods, and can decline specific tasks looks like a contractor.
- Tools and equipment. Employees generally use the payer’s tools and workspace. Contractors invest in their own and absorb the maintenance cost.1Canada Revenue Agency. Employee or Self-employed
- Subcontracting. An employee is hired personally. A contractor can bring in helpers or subcontract without asking permission.
- Financial risk and profit opportunity. Contractors can lose money on a job or profit by working efficiently; employees get paid regardless.
Integration matters too. Someone on the company email, in staff meetings, and on the org chart usually looks like an employee even when the paperwork says otherwise.2Canada Revenue Agency. Employment status: Employee or self-employed In Quebec, the analysis instead runs through the Civil Code and centres on whether a “relationship of subordination” exists.3Canada Revenue Agency. Contract Formed in Quebec
What the Payer Withholds on Each Slip
On a T4, the payer withholds federal and provincial income tax from every paycheque based on the worker’s TD1 Personal Tax Credits Return.4Canada Revenue Agency. Starting to work – Learn about your taxes Those withholdings are remitted to the Receiver General on a schedule that depends on the employer’s size — quarterly for small employers, monthly for most, and as often as twice a month for large payrolls.5Canada Revenue Agency. Types of remitters
On a T4A, nothing is withheld. The contractor receives the full invoice amount and is expected to set aside money for tax on their own. This is where new contractors often stumble. If your net tax owing exceeds $3,000 in the current year and in either of the two prior years, you must make quarterly instalment payments on March 15, June 15, September 15, and December 15. Quebec residents hit the trigger at $1,800.6Canada Revenue Agency. Who has to pay – Required tax instalments for individuals Missing an instalment triggers daily compound interest at the CRA’s prescribed rate, and a large enough shortfall adds a penalty on top.7Canada Revenue Agency. Required tax instalments for individuals – Interest and penalty charges The common advice is to move 25 to 30 percent of every payment into a separate account and leave it alone.
CPP, QPP, and EI: The Cost That Follows the Slip
The classification hits hardest on Canada Pension Plan contributions. For a T4 employee in 2026, the payer deducts CPP at 5.95% of pensionable earnings and matches that with another 5.95%. The employee bears half the cost. The basic exemption is $3,500, and maximum pensionable earnings are $74,600.8Canada Revenue Agency. CPP contribution rates, maximums and exemptions
A T4A contractor pays both halves. That’s 11.90% on earnings between $3,500 and $74,600, calculated at year-end and either paid outright or built into instalments. Many first-year contractors don’t budget for it and get caught out at filing time.
A second tier applies above the first ceiling. In 2026, CPP2 charges 4% on earnings between $74,600 and $85,000, split between employer and employee, with a maximum employee contribution of $416. Self-employed workers pay both halves, up to $832.9Canada Revenue Agency. Second additional CPP (CPP2) contribution rates and maximums
Quebec workers contribute to the Quebec Pension Plan instead. QPP totals 6.3% each for employees and employers (5.3% basic plus 1% supplementary), rising to 12.6% for the self-employed. Maximum pensionable earnings match CPP at $74,600, and the QPP second tier charges 4% between $74,600 and $85,000, or 8% for the self-employed.10Retraite Québec. Contributions to the Québec Pension Plan
Employment Insurance shows the sharpest split. T4 employees pay $1.63 per $100 of insurable earnings in 2026, with maximum insurable earnings of $68,900 and a maximum annual premium of $1,123.07.11Government of Canada. Summary of the 2026 Actuarial Report on the Employment Insurance Premium Rate The employer pays 1.4 times the employee’s premium.12Government of Canada. Employment Insurance – Information for employers Contractors are outside the EI system. They can’t collect regular EI benefits if their contracts dry up. They can voluntarily opt in for special benefits like maternity, parental, sickness, and compassionate care leave, but there’s a 12-month waiting period from the confirmed registration date and a minimum net self-employment income requirement for the prior calendar year.13Government of Canada. EI special benefits for self-employed people Signing up after you’re already pregnant or sick doesn’t produce an immediate claim.
GST/HST: Only Contractors Deal With It
Employees never charge sales tax on their labour. Contractors do, once they cross the threshold. If your total revenue from taxable supplies passes $30,000 over four consecutive calendar quarters, or in a single quarter, you’re no longer a “small supplier” and must register for a GST/HST account.14Canada Revenue Agency. When to register for and start charging the GST/HST From that point on, you charge tax on invoices, collect it, and remit it. Registered contractors have to file GST/HST returns even in nil periods.15Canada Revenue Agency. Reporting requirements and deadlines – File your GST/HST return Voluntary registration below $30,000 is possible and lets you claim input tax credits on business purchases, at the cost of adding tax to every invoice.
Business Deductions and Employment Protections
Contractors get something employees mostly don’t: the ability to deduct legitimate business expenses against their income on Form T2125. Reasonable current expenses incurred to earn business income qualify, including office supplies, professional and accounting fees, advertising, vehicle costs prorated for business use, and insurance. Meals and entertainment are capped at 50%.16Canada Revenue Agency. Business expenses
Home office expenses have stricter rules. The workspace must be your principal place of business, or a space used exclusively for earning income where you regularly meet clients. Eligible costs include heat, electricity, insurance, property taxes, mortgage interest, and rent, prorated by workspace square footage. Home office expenses can’t create or increase a business loss; any excess carries forward.17Canada Revenue Agency. Business-use-of-home expenses
Employees give up the deductions but gain a floor of statutory protections. Under the Canada Labour Code, federally regulated employees are entitled to at least two weeks’ written notice of termination or pay in lieu; those with three or more years of continuous service get one week per year worked, up to eight weeks. Employees with at least 12 consecutive months of service also get severance pay — the greater of two days’ wages per completed year or five days’ wages.18Government of Canada. Termination, layoff or dismissal Contractors get none of that. When a contract ends, it ends. Provincial employment standards provide comparable minimums for provincially regulated employees, but the same divide holds: employees have statutory floors, contractors have whatever they negotiated.
Filing Deadlines and Late Slip Penalties
Payers must deliver T4 slips to employees and T4A slips to contractors, and file copies with the CRA, by the last day of February following the calendar year.19Canada Revenue Agency. T4 slip – Information for employers20Canada Revenue Agency. T4A slip – Information for payers
Late filing under section 162(7.01) of the Income Tax Act carries penalties that scale with the number of slips:21Justice Laws Website. Income Tax Act RSC 1985 c 1 (5th Supp) – Section 162
- 1 to 50 slips: $10 per day, up to $1,000
- 51 to 500 slips: $15 per day, up to $1,500
- 501 to 2,500 slips: $25 per day, up to $2,500
- 2,501 to 10,000 slips: $50 per day, up to $5,000
- More than 10,000 slips: $75 per day, up to $7,500
The minimum penalty at every tier is $100. For very small filers, the CRA applies an administrative relief: if you’re late with five or fewer slips, the penalty is a flat $100 rather than the per-day calculation.22Canada Revenue Agency. When to file information returns
The Personal Services Business Trap
Some contractors incorporate expecting to access lower corporate rates. If you’d reasonably be considered an employee of the payer but for the corporation, the CRA can classify the corporation as a Personal Services Business.23Canada Revenue Agency. Worker who performs services on behalf of their own corporation (personal services business) A PSB loses both the small business deduction and the general rate reduction. Its income faces a federal rate of 28% plus a 5% additional tax, on top of provincial corporate tax. In Ontario, the combined rate reaches 44.5%.24Canada Revenue Agency. Personal Services Business That’s worse than the personal tax most people would pay on the same income, which erases the reason for incorporating in the first place. Construction, trucking, and professional services are industries the CRA specifically flags. Incorporating doesn’t change the underlying relationship. If you work for one client, use their tools, follow their schedule, and can’t subcontract, the CRA will look through the corporate form, and reassessments can reach back several years.
If You Think You’ve Been Given the Wrong Slip
When the classification is unclear, either the worker or the payer can ask the CRA for a binding CPP/EI ruling. The quickest route is through My Business Account or My Account, selecting “Request a CPP/EI Ruling.” You can also mail Form CPT1 to the CPP/EI Rulings Division at your regional tax services office.25Canada Revenue Agency. Request a CPP/EI ruling
If you disagree with the ruling, you have 90 days from the date you’re notified to appeal to the Minister of National Revenue using Form CPT100. If that appeal fails, another 90 days runs for taking the case to the Tax Court of Canada.26Canada Revenue Agency. File an appeal – Canada Pension Plan or Employment Insurance Miss those windows and you lose the formal challenge.
When the CRA reclassifies a T4A contractor as a T4 employee, the payer becomes liable for the source deductions that should have been withheld — income tax, both the employee and employer halves of CPP, and EI premiums including the 1.4x employer share. Interest runs from the original due dates, not the reassessment date, and recovering the employee’s share from the worker after the fact is rarely practical, so the employer typically absorbs the full amount. Under the Canada Labour Code, knowingly misclassifying an employee to avoid obligations can also trigger administrative monetary penalties from $1,000 to $12,000 depending on employer size, with compliance orders and payment orders for wages possible on top. For the worker, reclassification can mean retroactive access to EI, vacation pay, and other entitlements, but also unplanned CPP contributions, partially offset by the employer now owing the matching half.