Contractor Reporting – The T5018 Slip
Have you heard of the T5018 slip?
Did you know that if your business is operating in the construction industry, you may be required to file an annual T5018 Statement of Contractor Payments with Canada Revenue Agency (CRA)?
What is the reasoning behind yet another filing obligation with CRA you may ask? Well, it is estimated that the underground economy totals over $45 billion a year in unreported income in Canada and that the construction industry represents almost 1/3 of the underground economy. With those kinds of statistics, it is no surprise that CRA is taking action to combat this and one of their weapons of choice is the T5018.
The T5018 requires the payer to report to CRA who and what they have paid to subcontractors so that CRA can match those payments up to ensure that the income is being reported by the subcontractors.
So does this form impact you?
First, you need to determine if your business is considered to be operating in construction activities according to the list provided by CRA. Most of this list is the expected: drywalling, electrical, plumbing and carpentry; however, there are some less expected construction activities such as fencing and swimming pool installation.
Second, if you are in the construction, do have more than 50% of your revenue coming from construction activities? If the answer is yes, then you may have to continue to the third criteria.
Finally, did you make payments to subcontractors for construction services? Don’t forget that cash payments and barter payments are considered payments.
At the end of all of this if you are operating in the construction industry, have more than 50% of your revenues from these sources, and paid subcontractors, then you should be filing the T5018 annually with CRA.
What is the downside of failing to file these returns? The failure to file penalty is $25 a day with a minimum penalty of $100 and a maximum penalty of $2,500. And of course, these late filing penalties are not deductible for tax purposes.
If you have questions on the T5018 Statement of Contractor Payments, give us a call, and we will be happy to discuss it with you.
Bobi-Rae Miller has been working in public practice since 2000 and received her professional accounting designation in 2005. She focuses on working with small to medium-sized businesses and feels it is important for business owners to understand the financial side of their operations, so she takes the time to ensure that this happens.