T5018 vs T4A: Which Form for Your Subcontractor? (Decision Tree)

Every spring, thousands of Canadian trade contractors discover they filed the wrong information slip for their subcontractors. The CRA does not send a helpful warning first. They send a penalty notice: $25 per slip per day, minimum $100, maximum $2,500 per slip. If you paid four subs and filed the wrong form, that is up to $10,000 in penalties that a 30-second decision would have avoided.

The good news: one question resolves most cases. Is construction your primary source of business income? If yes, you file a T5018 for subcontractor payments. If no, or if the payment is for something other than construction work, you file a T4A (Box 048). The rest of this article covers the edge cases that trip people up.

The one-question test: is your business 50%+ construction income?

The CRA uses a simple threshold to decide which reporting regime applies to you. If more than 50% of your business’s income-earning activities come from construction, building, renovating, or repairing structures, then construction is your primary business. You report subcontractor payments on a T5018.

If construction is a secondary or incidental activity, you are outside the Contract Payment Reporting System (CPRS) and you use a T4A instead. The CRA’s own example: a natural gas company that builds pipelines. The principal business is gas transmission, not construction, so the company does not file T5018 slips for its pipeline subcontractors. It files T4As.

For the contractors reading this (electricians, plumbers, HVAC techs, drywallers, roofers), the answer is almost always yes. Construction is your primary income source. You file T5018s for your subs. End of story. Unless you hit one of the edge cases below.

When to use T5018

File a T5018 (Statement of Contract Payments) when all three of the following are true:

• Your business earns more than 50% of its income from construction activities.
• You paid a subcontractor for construction services (labour, materials, or both).
• Total payments to that subcontractor in the fiscal or calendar year exceeded $500.

The T5018 applies regardless of how the subcontractor is structured: sole proprietor, partnership, or corporation. The CRA specifically includes incorporated subcontractors in the T5018 regime for construction. This is the biggest source of confusion, so it gets its own section below.

Report the amounts excluding GST/HST. The T5018 covers labour and materials paid to the sub, not the tax on top.

Deadline: six months after the end of your reporting period. If you file by calendar year, that’s June 30 of the following year. If you use a non-calendar fiscal year, count six months after your fiscal year-end. (T4 and T4A slips have a different deadline, the last day of February. Don’t confuse the two.)

When to use T4A

File a T4A (Box 048, Fees for Services) when at least one of the following applies:

• Construction is not your primary business (less than 50% of income).
• The payment was for a non-construction service: bookkeeping, IT support, janitorial work, marketing, legal fees.
• The payee is a non-resident (use T4A-NR instead; see edge cases below).

Box 048 on the T4A is labelled “Fees for services.” It exists for exactly this purpose: reporting payments to independent contractors who do not fall under the construction reporting system.

One change worth flagging: in December 2025 the CRA announced it was ending its long-standing administrative moratorium on T4A Box 048 penalties for the trucking sector specifically. The broader Box 048 penalty moratorium for other industries was still in place at the time of writing. If you pay non-construction contractors, the safest assumption is that the CRA can lift the moratorium for your sector at any time, so file the T4A. Confirm the current administrative position with your accountant before relying on the moratorium.

Decision tree

Walk through these steps in order. Stop at the first step that gives you a definitive answer.

1. Is the payee a non-resident of Canada? Yes: file a T4A-NR (not T5018 or T4A). Stop here.
2. Is construction your primary business (more than 50% of income)? No: file a T4A Box 048 for any service payment over $500. Stop here.
3. Was the payment for construction work? No (e.g., you paid a bookkeeper or a lawyer): file a T4A Box 048. Stop here.
4. Did you pay more than $500 to this sub in the year? No: no slip required. Stop here.
5. All other cases:file a T5018. The sub’s corporate status does not matter (see below).

Edge cases

Incorporated subcontractors

The most common misconception: “My sub is incorporated, so I don’t need to file anything.” This is wrong for construction.

The T5018 regime explicitly covers payments to corporations. If your sub is an incorporated electrical company and you paid them $12,000 for rough-in work, you file a T5018 for $12,000. The sub’s incorporation status is irrelevant.

Compare this to the T4A regime for non-construction services. Under the general T4A rules, payments to incorporated businesses are often excluded because the corporation reports its own income. The T5018 rule is stricter because the CRA designed the CPRS specifically to track the underground cash economy in construction. It covers everyone who gets paid for construction work, regardless of their business structure.

Subs who do both construction and other work

Some subcontractors split their time between construction and other services. An example: a handyperson who does drywall repairs for you (construction) and also cleans the job site after (janitorial, not construction).

The correct approach is to split the payment on the slip. Report only the construction portion on the T5018 and the non-construction portion on a T4A Box 048. If you cannot reasonably separate the amounts, the CRA’s guidance is to report the dominant purpose of the payment. For most trade contractors, the dominant purpose is always construction, so the full amount goes on the T5018.

In practice, if a sub is doing drywall for you plus occasional site cleanup, keep separate line items on your invoices. It takes 30 seconds to separate them and saves hours of CRA correspondence if you are ever reviewed.

US-resident subcontractors (T4A-NR)

If you hire a US-based subcontractor who comes to Canada to do work, neither the T5018 nor the T4A applies. You use a T4A-NR (Statement of Fees, Commissions, or Other Amounts Paid to Non-Residents for Services Rendered in Canada).

There is also a withholding obligation. You must withhold 15% of the gross payment and remit it to the CRA by the 15th of the month following payment. The US-Canada tax treaty can reduce the final Canadian tax liability for the non-resident, but it does not automatically reduce your withholding rate at source. To reduce withholding below 15%, the non-resident sub must obtain a Regulation 105 waiver from the CRA before you make the payment.

If the US sub performs all their work remotely, from their location in the US, no T4A-NR is required because the services were not rendered in Canada. If they physically come to a Canadian job site, the T4A-NR and withholding obligation applies.

Penalties for using the wrong form

Using the wrong form is treated the same as not filing at all. The T5018 and T4A are different information returns; filing one when the CRA expected the other is a failure to file the correct return.

The $2,500 cap is per slip, not per filing. Five subcontractors filed late means up to $12,500 in penalties. For a busy trade contractor with eight subs, missing your filing deadline could cost $20,000. These penalties are also not deductible as a business expense.

Late filing also raises your audit risk. The CRA views missed information returns as a signal that the cash payments being reported on those slips may not be showing up on anyone’s income tax return. An auditor may follow the thread.

Pre-payment checklist

Before you pay a new subcontractor for the first time, get answers to these four questions. Ten minutes now prevents a penalty letter at year-end.

• Are they a Canadian resident? Ask for their business number or SIN. If they have neither and are based in the US, you are in T4A-NR territory and you need to withhold 15%.
• Are they doing construction work? If yes, and your business is primarily construction, you will file a T5018. Record their legal name, address, and business number (or SIN) before you pay them. You cannot file an accurate T5018 without it.
• Is the work a mix of construction and non-construction? Ask them to itemize invoices by type of work. It makes year-end slip preparation straightforward.
• Will you pay them more than $500 this year? If you are even close, track it. You are almost certainly going to cross the threshold and a slip will be required.

For the actual filing, you submit T5018s through the CRA’s online filing portal or via approved payroll software. As of January 1, 2024, the CRA requires electronic filing if you have 6 or more information returns of any type for the year. With 5 or fewer slips you can still file paper with a T5018 Summary, but electronic is faster and you get a confirmation number.

Keep copies of every slip for at least six years. The CRA’s normal reassessment period for information returns is three years, but they can go back further if fraud or misrepresentation is alleged.

If you track subcontractor payments in Markup, see also: T5018 filing requirements for Canadian contractors for the full filing walkthrough, including how to handle the T5018 Summary.

This article is for general information only and does not constitute tax advice. Rules can change. For advice specific to your situation, consult a CPA or tax professional licensed in Canada.