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T4 with code 11

#1 User is offline   Trusty Icon

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Posted 20 March 2007 - 02:00 AM

Dear all,

One client got one T4 from Placement Agency. There is no Employment income in Box 14 and no Income tax deducted in box 22. Yet there is CPP and EI deductions in box 16 & Box 18. The employement Code is 11 on the T4.

Is T2032 supposed to used to claim the expenses? And how to deal with CPP and EI deductions on the T4?

Anyone could help, please? :unsure:
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#2 User is offline   Joe Icon

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Posted 20 March 2007 - 02:46 AM

View PostTrusty, on Mar 19 2007, 07:00 PM, said:

Dear all,

One client got one T4 from Placement Agency. There is no Employment income in Box 14 and no Income tax deducted in box 22. Yet there is CPP and EI deductions in box 16 & Box 18. The employement Code is 11 on the T4.

Is T2032 supposed to used to claim the expenses? And how to deal with CPP and EI deductions on the T4?

Anyone could help, please? :unsure:



"Is T2032 supposed to used to claim the expenses? "

The client is a qualified accountant, dentist, lawyer, medical doctor, veterinarian or chiropractor ?



"And how to deal with CPP and EI deductions on the T4?"

Report on the T4.
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#3 User is offline   Trusty Icon

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Posted 20 March 2007 - 04:01 AM

View PostJoe, on Mar 20 2007, 02:46 AM, said:

"Is T2032 supposed to used to claim the expenses? "

The client is a qualified accountant, dentist, lawyer, medical doctor, veterinarian or chiropractor ?
"And how to deal with CPP and EI deductions on the T4?"

Report on the T4.


Thanks for the reply. Joe.

The client is a IT contractor and he got a letter from his placement agency stating that T2032 should be used for his tax return. :unsure: Besides, there is no amount of CPP insurable earnings in Box 26, only amount in Box 24 for EI insurable earnings. I tried to search CCRA website, yet didn't find any topics regarding how to report this type of self-employed income.

I would appreciate it if there is any further comments... :rolleyes:
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#4 User is offline   Joe Icon

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Posted 20 March 2007 - 04:35 AM

View PostTrusty, on Mar 19 2007, 09:01 PM, said:

Thanks for the reply. Joe.

The client is a IT contractor and he got a letter from his placement agency stating that T2032 should be used for his tax return. :unsure: Besides, there is no amount of CPP insurable earnings in Box 26, only amount in Box 24 for EI insurable earnings. I tried to search CCRA website, yet didn't find any topics regarding how to report this type of self-employed income.

I would appreciate it if there is any further comments... :rolleyes:



"The client is a IT contractor and he got a letter from his placement agency stating that T2032 should be used for his tax return" ROTFL

I becha CRA are darn pleased that that the "tax expert" at the placement agency is not preparing T1s :lol:


Read RC4120
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#5 User is offline   ansewrman Icon

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Posted 20 March 2007 - 02:21 PM

View PostTrusty, on Mar 20 2007, 02:00 AM, said:

Dear all,

One client got one T4 from Placement Agency. There is no Employment income in Box 14 and no Income tax deducted in box 22. Yet there is CPP and EI deductions in box 16 & Box 18. The employement Code is 11 on the T4.

Is T2032 supposed to used to claim the expenses? And how to deal with CPP and EI deductions on the T4?

Anyone could help, please? :unsure:


Trusty,

Joe has a viewpoint on this matter which is not shared by all, including me.
This subject has been the subject of several lengthy debates. You will have to make your own call on whom to believe, what is the correct treatment. You really should learn how to do a search before posting a question.

Take a look at, among others which are referenced in the post and you can find by a search,

http://community.int...e...ic=22&st=20

http://community.int...wtopic=22&st=20

Ahh, it is in the private forum, so you may not be abe to access. It was started this year by a posting in the QuickBooks forum so you should be able to access that.

Brief answer - It is self employment income but is CPP Pensionable and EI Insurable.

And Joe, I know you do not agree. And from the above post you have not changed your mind. And yes, Trusty referred to T2032 when he/she should have used T2124 but surely that is a venial sin. I really thought you had changed your mind when you did not reply to my previous post in the private forum (and you were posting elsewhere which indicated you had not retired). Ahh - maybe the posting was when you were having difficulty accessing the private forum which you referred to in another post. You do not seem to have changed your mind. Does the new data change your mind? Have you resolved your problems accessing the private forum?

I will paste the following from the post, this year addition to the subject, which I thought might be the final word but Joe does not seem to agree is:


---------------------------------------------------------------------------------------
Here is some new info. CRA finally seems to have caught on to this subject. The electronic filers manual now has specific instructions.

NOTE: They got one of the box numbers wrong. The reference to "If Box 28 is blank" should be "If Box 24 is blank".

Ansewrman

PS I don't read the QB forum usually. If someone wants to put this there, please feel free and go ahead.

PPS Maybe Joe has really retired. If not, this should rouse him. Maybe even rouse him if he has !

---------------------------------------


RC4018 Electronic Filers Manual 2006 Tax Year



Chapter 1



http://www.cra-arc.g...018/README.html



rc4018ch1-current-06e.pdf



Page 1-20



Placement Agency - If a self-employed worker, engaged by a Placement Agency, received a T4 slip with no entry in Box 14, Code 11 in Box 29 and CPP/QPP and EI premiums deducted:

If Box 26 is blank, update Field 5554 with the lesser of:

* the gross self-employment income reported in respect of that T4 slip, or

* the maximum CPP/QPP pensionable earnings for the year.

If Box 28 is blank, update Field 5478 with the lesser of:

* the gross self-employment income reported in respect of that T4 slip, or

* the maximum EI insurable earnings for the year.



Note: If T4 Placement Agency income is the only income reported at the self-employment fields, for processing purposes, a value of 1 is required at Field 371.

---------------------------------------------------
PS march 2007 - They published an update correcting the wrong T4 box number reference.



Edited to add link to quicbooks posting. The quotes there from RC4120 by Joe summarize the matter. Joe, you have to be convinced they are self employed earnings now. Trusty, you should have a box 81 entry, but you do not mention it.

http://community.int...showtopic=21545
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#6 User is offline   JohnV Icon

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Posted 20 March 2007 - 05:36 PM

Yup, I agree Ansewrman....

Use the appropriate self employment schedule for whatever income was earned, then use the T4 to claim CPP and EI credits. The CPP btw will reduce his CPP liability for the self employment earnings.

Seems it has become accepted practice by placement agencies to report income this way, though I'm surprised they actually showed nothing except the CPP and EI. Where\how were the eaarnings reported to the tax payer??
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#7 User is offline   Joe Icon

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Posted 20 March 2007 - 06:38 PM

View Postansewrman, on Mar 20 2007, 07:21 AM, said:

Joe has a viewpoint on this matter which is not shared by all, including me.


Anwerman, if you re-read above, all I said was:
1) The Act clearly very defines what T2032 report should be used for, and "an IT contractor" isnt one of them
and
2) Trusty should do it in the way CRA instructs in the circumstances


So, if you want to make up any other way, it will be you who has to debate with CRA, not I... ;)
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- We dont know the specific detail of this client (or is that this patient)'s circumstances - could be anything ...

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#8 User is offline   ansewrman Icon

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Posted 20 March 2007 - 06:58 PM

View PostJoe, on Mar 20 2007, 06:38 PM, said:

Anwerman, if you re-read above, all I said was:
1) The Act clearly very defines what T2032 report should be used for, and "an IT contractor" isnt one of them
and
2) Trusty should do it in the way CRA instructs in the circumstances
So, if you want to make up any other way, it will be you who has to debate with CRA, not I... ;)
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- We dont know the specific detail of this client (or is that this patient)'s circumstances - could be anything ...

.


Awww, comeon Joe. say it is self employment income. Pleeze. :o

Fully agree T2032 is out to lunch. Puffed up airs; but ITA does not really care which form is used. Both qualify as self employment.
Welcome back from the dark side. :-)

Ansewrman
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#9 User is offline   Joe Icon

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Posted 20 March 2007 - 08:00 PM

View Postansewrman, on Mar 20 2007, 11:58 AM, said:

Fully agree T2032 is out to lunch. Puffed up airs; but ITA does not really care which form is used. Both qualify as self employment.


And Lo, the Parliament laboured long into the night,
Yea, sayeth the members, forsooth, this is exactly what the Dept Finance and us sayeth how we desiresth the Rules to be for Professional Income reporting for Taxeth
Verily, have not our backroom legal team laboured long to ensure that all the i's are dotted so that we can all say "aye" to the aforesaid amendments?
For our Word is Law, and all the minions shall Obey!

Then they said:

Aw, what the Hay! Its Friday! Party On!
Let the people be free to calculate their taxes by whatever rules they feel like making up!
Let the Manager Placement Agency dispense tax advice! Let Jim the Professional Sanitary Engineer use his own formula and format for calculating Income!
Let CRA be set free to ignore whichever sections of the ITA they choose!
Set the people Free!!!
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#10 User is offline   JohnV Icon

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Posted 21 March 2007 - 02:38 PM

I'm kind of with Joe here A-man...

If there is a clear direction, i.e. business and professional income have separate schedules, then the smart thing is to do it right, even though practically speaking the net income numbers should end up the same and no more or less taxes are due...

Only in cases such as our favourite missionary, where there IS some judgment required can I see doing the best we can with what we have.

I'm all for raising the fewest possible number of red flags.

Seems to me business and professional income have different revenue and expense "patterns". A professional can keep their overhead in a briefcase, has higher margins, pays out most for say rent and staff etc....whereas there is a great variation in business operations. Since all the computer knows are numbers and programmed relationships, this could spit out an "exceptions" report, or simply "this business code is not a professional code...what else is wrong here??

Hence IMO it's a bit cavalier to simply say, who cares what form is used if the bottom line is right? The least it might spawn is an enquiry...as an example, look at the "T4A Sweep" thread...and you know at the administrative end (CRA) you're dealing with (sometimes hugely anal) bureaucrats who are paid to make sure things are done exactly right....
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#11 User is offline   ansewrman Icon

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Posted 21 March 2007 - 03:28 PM

View PostJohnV, on Mar 21 2007, 02:38 PM, said:

I'm all for raising the fewest possible number of red flags.

Hence IMO it's a bit cavalier to simply say, who cares what form is used if the bottom line is right? The least it might spawn is an enquiry...as an example, look at the "T4A Sweep" thread...and you know at the administrative end (CRA) you're dealing with (sometimes hugely anal) bureaucrats who are paid to make sure things are done exactly right....


Sorry, did not make myself clear. Was working on another agenda.
Definitely use T2124 not T2032. Sorry if there was any other possible interpretaion. Did not mean should use T2032.

I was working on the agenda of having Joe say it was self employment income. As per ITA and CRA. Welcoming him back from the dark side. The first step is admitting you had a problem.

I was attempting to pull Joe's ITA leg. Maybe not with great success but I do like the proverbs I got back, even if it was not quite what I was trying to extract. Thanks Joe.

Ansewrman
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#12 User is offline   JohnV Icon

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Posted 21 March 2007 - 04:01 PM

:)

I remember my first very long discussion with Joe regarding writing off a library of professional text books students accumulate in university and professional schools...Joe was technically correct, I was arguing practicality...

I learned to like and respect Joe via that one...but I think he's still on the dark side there.


http://www.starwars.com/databank/character/darthsidious/img/movie_bg.jpg
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#13 User is offline   ansewrman Icon

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Posted 21 March 2007 - 04:10 PM

View PostJohnV, on Mar 21 2007, 04:01 PM, said:

:)

I remember my first very long discussion with Joe regarding writing off a library of professional text books students accumulate in university and professional schools...Joe was technically correct, I was arguing practicality...and I think he's still on the dark side there


Is there a common thread here? Don't all discussion with Joe tend to be LONG. VEERRYY LLOONNGG. :D

Like the jpeg.

ansewrman
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#14 User is offline   Joe Icon

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Posted 21 March 2007 - 06:11 PM

View Postansewrman, on Mar 21 2007, 09:10 AM, said:

Is there a common thread here? Don't all discussion with Joe tend to be LONG. VEERRYY LLOONNGG. :D



:P Naah, dont let myself get drawn into too much in the "open google forum" section...
BTW, yes, the system now lets me in ok!


JohnV: "even though practically speaking the net income numbers should end up the same"

Not necessarily - There are other tax rules applying to Profs other than mentioned above....
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- Good jpg! :)
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#15 User is offline   AllanSzuch Icon

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Posted 21 March 2007 - 08:32 PM

View PostJoe, on Mar 21 2007, 02:11 PM, said:

:P Naah, dont let myself get drawn into too much in the "open google forum" section...
BTW, yes, the system now lets me in ok!
JohnV: "even though practically speaking the net income numbers should end up the same"

Not necessarily - There are other tax rules applying to Profs other than mentioned above....
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- Good jpg! :)
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Continuing the thread...

My client got the following: "Attached is your T4 for the year 2006. Please note: Although you are receiving a T4, your relationship with ****** is considered contractural. This is defined by using code 11, which stands for Placement Agency - Self-employed, in box 29 on the T4 provided. As per CRA guidelines, when using code 11 in box 29, box 14 must remain blank. New for this year is the requirement to report earnings in the "Other information" section of the T4, using code 81. ...Our firm will not issue a T2200 for expense purposes. A T2200 implies an employee-employer relationship, which does not exist. By indicating code 11 in box 29, eligible expenses can be declared...."

The problem is that the Agency put the earnings into box 14. I crossed it out and wrote the earnings into box 81.

Where can the expenses be declared? on form T2124?

My tax program shows warnings: "T4/2 Box 24 exceeds box 14"
My tax program shows warnings: "T4/2 EI premieums have been entered. Please enter corresponding insurable earnings."
My tax program shows warnings: "T4/2 CPP contributions have been enered. Please enter the corresponding pensionable earnings."
Do I override? and input those earnings?

Why doesn't Profile's T4 have Box 29, Box 81?
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#16 User is offline   ansewrman Icon

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Posted 21 March 2007 - 08:52 PM

View PostAllanSzuch, on Mar 21 2007, 08:32 PM, said:

Continuing the thread...

The problem is that the Agency put the earnings into box 14. I crossed it out and wrote the earnings into box 81.

Where can the expenses be declared? on form T2124?

Do I override? and input those earnings?

Why doesn't Profile's T4 have Box 29, Box 81?


And this is why we should not post on the open fourm.
Joe, how did you stand it when you could only access the non private forum?

A Poll - what do you think is the best solution:

1. A dictionary of the English language.
2. Reading glasses.
3. A map with directions to the nearest professional.
4. Holy water. To use on the clients.
5. A stake. For the clients to use.

Ansewrman
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Posted 21 March 2007 - 08:53 PM

View PostAllanSzuch, on Mar 21 2007, 04:32 PM, said:

The problem is that the Agency put the earnings into box 14. I crossed it out and wrote the earnings into box 81.

Well...... unless you were able to alter copy 1 of your clients T4 while you were at it..... you can liquid paper out all the information on copy 2 and 3 but it won't be of much help in the long run....... or when 'slip matching' season starts in about 8 months time.
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#18 User is offline   RL Tax Joe Icon

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Posted 21 March 2007 - 09:04 PM

View Postansewrman, on Mar 21 2007, 03:52 PM, said:

And this is why we should not post on the open fourm.
Joe, how did you stand it when you could only access the non private forum?

A Poll - what do you think is the best solution:

1. A dictionary of the English language.
2. Reading glasses.
3. A map with directions to the nearest professional.
4. Holy water. To use on the clients.
5. A stake. For the clients to use.

Ansewrman


Holy Water....definitely Holy Water.
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#19 User is offline   JohnV Icon

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Posted 21 March 2007 - 09:11 PM

"The problem is that the Agency put the earnings into box 14. I crossed it out and wrote the earnings into box 81"


Yeah dontcha just hate it when they mess up T4s. I solved my own particular problem by whiting out the payee, the sin, and changing them. Then I reasoned "hey, this isn't mine, so I threw it out :D


Alan, you're better off not to tamper with ANY slip. Yeah, I know the T4's wrong, but then report things the way it should be, and if you feel you need to, include a note to explain what you did.


As for the poll, Joe, if you go holy water, you're gonna need a pool here buddy..
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#20 User is offline   Joe Icon

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Posted 21 March 2007 - 11:01 PM

View PostJohnV, on Mar 21 2007, 02:11 PM, said:

" As for the poll, Joe, if you go holy water, you're gonna need a pool here buddy..


Well, I was going to say "Holy ........"! :o
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