Service Payments and the CRA: What Most Small Businesses Are Missing
What Canadian Small Businesses Should Know About CRA’s Reporting Fees for Service Requirement
If you run a small or medium-sized business in Canada, you’ve probably heard about the CRA’s Reporting Fees for Service (RFS) requirement—or maybe you haven’t. Either way, it’s something you’ll want to understand, especially as the CRA continues to crack down on the underground economy and tighten compliance rules.
So, what’s this all about? Let’s break it down.
What Is the RFS Requirement?
In simple terms, the CRA wants businesses to report payments they make to other businesses for services. If you pay someone more than $500 in a calendar year for services—not goods—you’re expected to report it, usually by issuing a T4A slip.
This helps the CRA track income and ensure taxes are being paid fairly. But for many small businesses, this requirement has raised a few eyebrows.
What Did the CRA Learn from Its Consultation?
Last year, the CRA asked over 1,400 businesses across Canada how they’re handling the RFS requirement. Here’s what they found—and what it means for you:
1. Awareness Is Low Among Small Businesses
While two-thirds of respondents knew about the RFS rule, awareness dropped significantly among micro and small businesses. That’s a concern, especially since these businesses make up a big chunk of Canada’s economy.
2. T4A Slips Are Causing Headaches
Many businesses aren’t sure the T4A is the right tool for the job. Why? Because it can mean:
Issuing multiple slips
Hiring extra help
Upgrading accounting software
That’s a lot of work for something that might not feel relevant to your day-to-day operations.
3. Invoices Are All Over the Place
Some businesses separate goods and services on invoices. Others don’t. This inconsistency makes it harder to know what needs to be reported—and how.
4. The $500 Threshold Feels Too Low
A whopping 77% of businesses said the current threshold is unrealistic. Many suggested raising it to somewhere between $10,000 and $30,000 to reduce the paperwork burden.
5. Who Responded?
Most feedback came from small businesses in Ontario, BC, Alberta, and Quebec—especially in sectors like professional services, finance, and transportation.
What Stakeholders Are Saying
The CRA’s RFS requirement has sparked mixed reactions from industry professionals and business groups. On one hand, organizations like the Chartered Professional Accountants of Canada (CPA Canada) and the National Payroll Institute acknowledge the importance of third-party reporting in promoting tax fairness and curbing the underground economy. They support the initiative’s goals but argue that the current use of the T4A slip—typically associated with payroll—is confusing and administratively burdensome for businesses
On the other hand, groups like the Tax Executives Institute (TEI) and the Canadian Federation of Independent Business (CFIB) have voiced strong concerns. TEI, for example, recommends exempting payments made to GST-registered businesses, arguing that the CRA already has access to much of the necessary data through GST filings. They believe this exemption would reduce unnecessary reporting and allow the CRA to focus on areas of true non-compliance. Many stakeholders also agree that the current $500 threshold is too low and should be raised to better reflect the realities of small business operations
What Should You Do?
If you’re a small business owner, here are a few steps to stay ahead:
Review your invoicing practices—make sure services are clearly separated from goods.
Check your accounting software—can it generate T4A slips easily?
Talk to your accountant—they can help you understand what needs to be reported and how.
Need Help Navigating This?
At MAM CPA, we specialize in helping small and medium businesses stay compliant without the stress. Whether you need help with T4A slips, CRA reporting, or just want to make sure your books are in order, we’ve got your back.