As your business grows, so does the complexity of managing your workforce. Many business owners start by working solo or with a small in-house team. Then growth happens. You need specialized skills for a project. You bring on a subcontractor to handle specific deliverables. A consultant reviews your operations. Over time, working with contractors becomes part of your operating model.
With contractors comes a compliance requirement you cannot ignore: issuing T4A slips. Understanding when a T4A is required, how it differs from a T4, and the filing deadline will save you from costly mistakes and CRA headaches.
The $500 Threshold Rule
According to the CRA, if you pay an individual or sole proprietor $500 or more for services in a calendar year, you must issue a T4A slip and file it with the Canada Revenue Agency. Payments below this threshold do not require a T4A, though some businesses choose to issue them anyway for record-keeping purposes.
This threshold applies to fees for services. It does not include GST or HST. If a contractor’s total payments to you for a year are $450 plus $65 in HST, only the $450 counts toward the threshold.
One detail many business owners miss: the T4A summarizes all payments to a contractor across the entire calendar year, not individual invoices. If you paid a contractor $300 in June and $250 in November, that is $550 total, which crosses the $500 threshold. You must issue a T4A.
T4A vs. T4: A Critical Distinction
The confusion between T4A and T4 slips costs business owners time and money every year. Here is the core difference: a T4 is for employees. A T4A is for contractors.
When you issue a T4 to an employee, you have already deducted income tax, Canada Pension Plan contributions, and Employment Insurance premiums from their pay. Those deductions appear on the T4. The employee uses the T4 to file their tax return and claim credits for those withholdings.
A T4A, on the other hand, reports payments you made to a contractor without any withholdings. The contractor receives the full amount and is responsible for managing their own taxes, CPP contributions, and other obligations. They use the T4A when they file their own tax return as self-employed income.
This distinction matters to the CRA. It is also where the most common classification error occurs.
T5018: The Construction Industry Equivalent
If your business operates in construction, you may need to issue T5018 slips instead of (or in addition to) T4As. The CRA says that a T5018 is required when you pay a subcontractor $500 or more for construction services in a calendar year.
The T5018 serves the same purpose as a T4A—it reports payments to a subcontractor without withholdings—but it is specific to the construction industry. If you contract with subcontractors for labour, materials, or both, and those payments reach $500 or more, a T5018 must be filed by the same February 28 deadline.
The rules around T5018 classification are similarly strict. The CRA scrutinizes construction relationships closely. If you misclassify a subcontractor as self-employed when they should be treated as an employee, or vice versa, the same penalties apply: backdated CPP, EI, interest, and administrative fees.
The Most Common Classification Mistake
Business owners sometimes call someone a contractor to avoid payroll costs. They reason that issuing a T4A is simpler than managing a payroll with deductions. But calling someone a contractor does not make them one. The CRA looks at the real working relationship.
An actual contractor typically sets their own hours, provides their own tools, controls how the work gets done, and has the chance to profit or suffer a loss on the engagement. They may work for other clients. An employee, by contrast, works under your control during set hours, uses your equipment, and receives a regular paycheck regardless of whether the business makes or loses money.
If the CRA audits your contractor relationships and determines someone should have been classified as an employee, the consequences are severe. You may owe backdated employer CPP and EI contributions, plus interest and penalties. That is why it is worth reviewing these classifications carefully before year-end rather than after.
Filing Deadlines and Penalties
According to CRA requirements, you must file T4A slips and provide copies to your contractors by the last day of February following the calendar year in which you made the payments. For work done in 2026, the deadline is February 28, 2027.
Missing this deadline carries real penalties. The CRA assesses daily penalties that start at $100 and increase based on how many slips you file late and how overdue they are. Unlike some compliance deadlines that offer grace periods, this one does not. Late filing can quickly become expensive.
For businesses tracking contractor payments throughout the year, this deadline is manageable. If you wait until late February to gather invoices and amounts, you will be scrambling.
What You Need to Do
Start now, even if the year-end feels far away. Set up a simple tracking system for contractor payments. As you invoice and pay contractors, record their payments in one place. By the time you reach year-end, you will know exactly who crossed the $500 threshold and what amounts to report.
Verify contractor information. Collect the correct legal names, business numbers (if they are incorporated or have one), and Social Insurance Numbers. Contractors will need these details to file their own taxes. T4A slips require accurate information on both sides.
If you are uncertain whether someone should be classified as an employee or a contractor, document the working relationship and ask your accountant before year-end. That conversation now beats an unexpected CRA letter later.
Contractors who have worked with your business for years should get particular attention. Over time, working relationships can shift in ways that blur the line between contractor and employee. A regular review protects both your business and the contractor.
Start Your Planning Now
T4As are not complicated, but they do require attention to a few key details: the $500 threshold, the distinction between T4 and T4A, correct classification, and the February deadline. For growing businesses, contractor payments are often a sign of progress. Making sure they are reported correctly keeps you compliant and protects your relationship with the CRA. Start your tracking system early, verify your contractor classifications, and plan ahead for the February filing deadline.