Every T4, From Every Employer: The Agency Shifts That Cost You Later

Why the Second Job Deducts Too Little

Payroll works one employer at a time. The formula takes the pay on the cheque in front of it, multiplies it out to a full year, and deducts tax as if that were your whole income. It doesn't know about the hospital down the road.

The low brackets get used twice. Your second employer taxes its pay starting from the bottom rate. On your return, that income sits on top of your main salary and is taxed at your highest rate.

The basic personal amount gets used twice. Each employer applies the credits you claimed on the TD1 form you filled out when you started. Claim the basic personal amount on both forms and both employers leave that much of your pay untaxed. You only get it once.

Neither employer has done anything wrong. The total is short, and the return is where the difference gets collected.

Fixing It at the Source

The TD1 has a box for this. If you have more than one employer at the same time and you've already claimed your personal credits with the first, tick "More than one employer or payer at the same time" on the second employer's form and enter 0 as your total claim amount. That employer then deducts tax without applying the credits a second time.

That fixes the credits, not the brackets. If the second job is more than occasional, the TD1 is also how you ask an employer to deduct more tax from each cheque.

To see roughly what the gap is this year, put your combined income into our tax estimator and compare the result with the tax deducted on your pay stubs so far.

When the Agency Deducts No Tax at All

Agency work has a wrinkle of its own, and it depends on how the agency took you on. There are three versions.

You're the agency's employee. It deducts income tax, CPP and EI like any employer, and the T4 looks like the one from your hospital.

You aren't its employee, but it places you and pays you. Where an agency places a worker under the direction and control of its client and the agency does the paying, the CRA has the agency deduct CPP contributions and EI premiums and no income tax. Its guidance to agencies says the worker is responsible for their own income tax. That T4 reads differently: box 14 is empty, box 22 shows no tax, box 29 carries employment code 11, and your gross pay appears under code 81 in the "Other information" area. The CRA's instruction for the code 81 amount is to report it on Form T2125, the statement of business income, and not on line 10100 with your employment income.

The agency treats you as self-employed outright. You get a T4A, and nothing has been deducted.

In the second and third versions, all of the income tax on that pay is still owing when you file. Look at your first pay stub from the agency. If there's no income tax line, set money aside as you go. Our self-employed tax guide covers the T2125, and our employee or subcontractor guide covers how the CRA decides which of these you really are.

See What the CRA Holds Before You File

Employers have until the end of February to give you your T4 and to file it with the CRA. The CRA can't show a slip until the issuer has sent it in, so a slip an agency files at the deadline won't be visible in early February.

Your CRA account lists the slips filed under your social insurance number. Before you file, compare three things: the employers you actually worked for during the year, the slips you have in hand, and the slips the CRA shows. An employer on the first list that's missing from the other two is a slip still on its way.

Auto-fill my return, which loads slips into tax software, only pulls what the CRA has on file on the day you use it. Run it in mid-February and it can fill in the hospital T4 and say nothing about the agency one.

If you don't have an account yet, our guide to setting up your CRA account covers registration. Once you've authorized us as your representative, we can see the same list.

If a Slip Still Hasn't Come

Ask the employer or agency first. The CRA doesn't issue slips, and it can't give you a copy of one the issuer hasn't filed.

If the filing deadline is close and the slip still hasn't arrived, the CRA's guidance is to estimate. Add up your pay stubs from that employer and report the income and deductions they show. On a paper return, attach the stubs and a note giving the issuer's name and address, the type of income, and what you're doing to get the slip. Filing electronically, keep the documents in case the CRA asks for them.

That's the reason to keep the last pay stub from every job until its T4 shows up.

When the Slip Turns Up After You've Filed

Don't file a second return. Wait for your notice of assessment, then ask the CRA to change the return you filed.

There are three ways to ask: Change my return in your CRA account, ReFILE through certified tax software, or Form T1-ADJ by mail. The CRA's stated turnaround is within two weeks for an online request and within 19 weeks by mail.

Pay the extra tax when you make the request, not when the reassessment arrives. Interest on an unpaid amount compounds daily from the day after the filing due date, and that includes amounts that come from a reassessment.

It can also go your way. Each employer deducts CPP and EI on its own pay, so two or three jobs can put you over the yearly maximum. The return works out the overpayment and it comes back to you, but only if every T4 is on it.

If It Has Happened Before

One missed slip costs you the tax and the interest. A second one within four years can cost more. Under the Income Tax Act, if you leave $500 or more of income off a return, and you also left $500 or more off any of the three returns before it, there's a penalty for repeated failure to report income. It's the lesser of 10% of the amount left off and half of the tax understated on that amount less the tax already withheld from it. The province charges a matching penalty.

The CRA may grant penalty relief when you disclose an unreported amount before it contacts you. That's the practical reason to fix a missed slip the week you find it, not the week the letter comes.