The Subcontractor’s Guide to Taxes

Introduction

Subcontractors in Quebec — including electricians, plumbers, roofers, drywall installers, painters, welders, and other skilled trades — operate as independent businesses, not employees. This means tax rules are very different, and mistakes can lead to reassessments, penalties, or denial of deductions. This guide explains how subcontractors must handle T4A slips, register for GST/QST, claim expenses, and build an audit-proof tax system — and how a CPA firm near you in Montreal can help.

Legal and Regulatory Framework

Under the Income Tax Act and the Taxation Act of Quebec, subcontractors must report all business income, including amounts on T4A slips, direct payments from contractors, and cash income. GST and QST registration is required once annual taxable revenues exceed the small-supplier threshold, although most subcontractors exceed it quickly. Subcontractors must issue invoices that include tax numbers, the nature of work performed, and GST/QST amounts. Deductible expenses include tools, equipment, protective gear, subcontracted labour, vehicle costs, home office expenses, cellphone bills, insurance, and union dues. CRA and Revenu Québec require accurate documentation for all expenses.

Key Court Decisions

Courts have ruled that subcontractors cannot deduct expenses without receipts or documentation. Judges have repeatedly denied vehicle and tool deductions where taxpayers lacked logs, invoices, or proof of business use. Several rulings confirm that failure to issue proper invoices with GST/QST leads to penalties and denied input tax credits for clients — increasing audit exposure. Courts also reinforce that subcontractors must report all income on T4A slips, even if they dispute the amount.

Why CRA and Revenu Québec Target Subcontractors

Subcontractors are heavily monitored because:
• Many work in cash-heavy environments
• T4A slips often do not match reported income
• Personal and business expenses are mixed
• Large deductions for vehicles and tools are claimed without proof
• GST/QST is charged incorrectly or not remitted
• Subcontractor agreements are missing

Auditors compare T4A slips, supplier invoices, contractor records, RBQ status, and bank deposits to detect discrepancies.

Mackisen Strategy

At Mackisen CPA Montreal, we help subcontractors build strong accounting systems that withstand CRA and Revenu Québec scrutiny. We reconcile T4A slips, set up GST/QST registration and filing schedules, and ensure your invoices meet required standards. We categorize tools and equipment properly, build mileage logs, and optimize deductions for subcontractor payments, vehicle costs, and supplies. If audited, we defend your records, rebuild missing documentation, and negotiate reduced reassessments.

Real Client Experience

A Montreal subcontractor received a T4A showing $98,000 of income but reported only $74,000, claiming errors. CRA audited. We reconciled payment records, matched deposits, corrected the filing, and reduced penalties by demonstrating clerical inconsistencies. Another subcontractor claimed $22,000 in tool expenses without receipts; we contacted suppliers, reconstructed purchases, and salvaged much of the deduction.

Common Questions

What is a T4A slip?

It is a tax slip issued by contractors showing how much they paid you as an independent subcontractor.

Do subcontractors need to register for GST/QST?

Yes, once taxable revenues exceed the small-supplier threshold (usually almost immediately in trades).

What expenses can subcontractors deduct?

Tools, equipment, vehicle costs, safety gear, home office expenses, subcontracted labour, cellphone bills, and insurance.

What records are required?

Invoices, receipts, mileage logs, subcontractor agreements, and proof of payments.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps subcontractors stay compliant, reduce taxes, and avoid costly audits. Whether working with a single contractor or multiple GCs, our expert team ensures precision, transparency, and full audit defense.