It’s tax time, and I’ve been getting lots of questions from doctors about their T4A slips.
Each year the British Columbia Medical Association (BCMA) issues T4A slips to physicians who have participated in the benefit programs administered by the BCMA.
These benefit programs include:
- Continuing Medical Education (CME) Benefit
- Canadian Medical Protective Association (CMPA) Rebate
- Physician’s Disability Insurance (PDI)
- Parental Leave Program (PLP)
- Contributory Professional Retirement Savings Plan (CPRSP)
The T4A will show an amount in Box 28 – Other Income which you must report in your personal income tax return. The reverse side of the T4A has a breakdown of the amounts reported for each program that you participated in.
The T4A slip can be reported in two ways.
Generally, items reported in Box 28 are reported on Line 130 – Other Income in your personal income tax return. This is appropriate if your medical income is being reported in your corporation and you are not reporting self employment income on your tax return.
If you are unincorporated, you will be reporting your medical income on Form T2125 – Statement of Business or Professional Activities. You can include the amount of the T4A in your gross professional fees earned.
The advantage of reporting the T4A as professional income is that it qualifies as earned income for the calculation of your RRSP deduction limit. Items reported on Line 130 of the tax return have no impact on your RRSP deduction calculation.
The downside is that you will probably receive a telephone call from the Canada Revenue Agency (CRA) asking why you didn’t report the T4A, and you will then need to provide proof that the T4A amount was included in your professional income. CRA matches all information slips with tax returns to ensure that all amounts have been reported. By entering the amount on Line 130, it is obvious to CRA that you have reported the amount.
Some practitioners report the income on Line 104 – Other Employment Income in an attempt to treat it as earned income for the RRSP deduction limit calculation. CRA has been reclassifying these amounts to Line 130 during its slip matching process.
It is very important that you report the T4A on your income tax return or provide it to your accountant when they are preparing your income tax return. The penalties for not reporting a slip are very severe.
If you fail to report income in a tax return for a given year and have also also failed to report income in a tax return for any of the three preceding years, a penalty of 20% of the amount of income not reported in the current year will be imposed. It is your responsibility to report this income, even if you did not know you were going to have a T4A slip. If you are using an accountant who does not deal with many doctors, they also may be unaware that you will have to report this benefit.
If you have not received your T4A, you can download it from your BCMA account. You will not receive a T4A if you didn’t participate in any of the programs, or the benefits were paid to your corporation.
One final thing to be aware of is double counting income. I have many clients that simply give me the total of the deposits their bank account as their professional income. Often this total includes deposits received from the BCMA for CMPA, CME and PLP (cash is not received for the CPRSP and PDI benefits.) If the T4A is reported and the deposits are not reviewed, it is possible that income will be overstated by the cash benefits received. An accountant not familiar with physicians will not be aware of this potential problem.
Please feel free to leave a comment or contact me directly if you have any questions.