Contractor payroll and subcontractor reporting

Crew and subs are two different systems

Employees get source deductions withheld, a T4 at year-end, and a Record of Employment when they leave. Subcontractors invoice you, handle their own remittances, and are reported on a T5018 if construction is your primary business.

Both are normal and legitimate. The exposure is in treating someone as the second when CRA would call them the first.

Where the classification line falls

CRA looks at substance rather than paperwork. Who controls how and when the work gets done. Whose tools and equipment are used. Whether the person can subcontract the work out to someone else. Whether they can make a profit or take a loss on the arrangement.

A worker who shows up when you tell them, uses your tools, works only for you, and is paid hourly looks like an employee regardless of what the agreement says. If that is reclassified, you owe the deductions that should have been withheld plus penalties and interest, and because withheld source deductions are trust funds, directors can be personally liable for them.

Our guide on T4 versus T4A sets out the tests, and the classification is worth reviewing before it is tested rather than after.

T5018 reporting

If construction is your primary business activity, payments to subcontractors are reported on a T5018 information return once cumulative payments to a subcontractor pass five hundred dollars in the reporting period. It is due six months after your fiscal year end and is separate from both payroll and your corporate return.

Because it has to reconcile to your subcontractor expense, tracking payments per subcontractor during the year rather than reconstructing them afterwards is the difference between a report and a project. Our T5018 guide covers it in detail.

WSIB and clearance

In Ontario, WSIB coverage is mandatory across most of construction, including many independent operators. Premiums are based on classification and reported alongside payroll, and general contractors routinely require a clearance certificate before releasing payment, so lapsed coverage becomes a cash-flow problem quickly.

Our guide on WSIB for Ontario employers covers registration and rates.

Seasonal work and Records of Employment

Construction is seasonal, and seasonal layoffs are interruptions of earnings. Each one needs a Record of Employment filed with Service Canada, not CRA, within a short window, and the Block 16 reason code matters. A shortage of work at season end is code A, and coding it as a quit will cause problems for the worker’s Employment Insurance claim and bring questions back to you. Our Record of Employment guide has the deadlines and the full code list.

Remittances

Source deductions are due by the fifteenth of the month after you pay your crew for most small employers, with a graduated penalty for lateness. Because taxifi runs payroll inside the same service that keeps your books, each run posts into job costing and the year-end slips reconcile to the remittances.

Also: General contractors in Ontario · Plumbers in Toronto · Trades & contractors. More for this industry: Contractor accounting · Contractor bookkeeping · Contractor payroll and T5018

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