Answers to your taxable benefit questions

Transcript

Speaking notes
May 2017

Slide 1

Hello and welcome to our question and answer webinar on taxable benefits. My name is Maurice and I am your presenter.

Today's webinar is the first in this four-part question and answer series.

I would like to mention that today's webinar will be recorded and posted on the Canada Revenue Agency website at a later date.

We received a lot of great questions between March 15 and April 7, 2017. Unfortunately, some of these questions did not provide enough details or were too broad, consequently we were not able to provide an answer as the variables would have been too extensive. Lots of questions were very similar, so we chose to answer them using one response and provide as much detail as possible. We also received questions that did not pertain to taxable benefits, so they are not addressed in this webinar. If you have such questions, please contact the CRA.

Slide 2

In previous webinars, we provided explanations on various aspects of payroll.

During today's webinar, I will answer your pre-submitted questions on the following taxable benefit topics:

  • Automobile benefit
  • Parking
  • Insurance
  • Gifts
  • Awards and rewards
  • Long service awards
  • Other benefits and
  • Reporting

Slide 3

Why are benefits conferred on employees considered to be taxable? Let's review the three underlying concepts.

Employment benefits are taxable because the employee has received an economic advantage. When employees receive a benefit, they are financially further ahead than employees in similar circumstances who don't receive the same benefit.

The second concept is the benefit needs to be measurable in monetary terms. For a benefit to be taxable, you have to know how much to tax. Therefore, you need a number to use for the tax calculation.

There are a number of ways to determine the value for a good or a service. For the purposes of valuing a taxable benefit, "value" is interpreted as "fair market value," which is defined as the highest price that can be obtained in an open market between two parties dealing at arm's length. 

Our third key concept is primary beneficiary. 

It is the most nuanced because, generally, both the employee and the employer gain from the provision of the benefit.  The question is who benefits the most?  

Why the benefit is provided often offers clues as to the identity of the primary beneficiary. When the item is required to perform the duties of employment, the employer is the primary beneficiary.  Where a personal item is provided, or a personal expense paid, the employee is the primary beneficiary.

Slide 4

Let's start by reviewing your questions on the automobile as a taxable benefit.

Slide 5

We received a lot of questions on allowances and flat rates. For example, what to deduct if you pay a fixed weekly or monthly amount.

If you pay your employee an allowance or a flat rate that is not based on the number of kilometres driven, it is a taxable benefit and has to be included in the employee's income.

A flat-rate or lump-sum allowance that is not based on the number of kilometres driven cannot be averaged at the end of the year to determine a reasonable per-kilometre rate and then be excluded from the employee's income.

See chapter 2 of theT4130, Employer's Guide – Taxable Benefits and Allowances, for more information.

Include the taxable benefit in box 14 and under code 40 of the employee's T4 slip. You will have to deduct income tax, CPP and EI on the benefit.

Slide 6

Our outside sales staff submit mileage reports every week, and we reimburse them for the mileage driven for business purposes based on the reasonable amount set by CRA.  However, we guarantee to give them a set amount if they do not drive enough or give them the difference if they did not drive the required distance to reach or exceed the minimum guaranteed mileage reimbursement. This set amount or the difference of the mileage reimbursement is included as a taxable benefit. Are we doing it correctly?

Unfortunately, no. If you pay your employee an allowance that is a combination of flat-rate and reasonable per-kilometre allowances that cover the same use of the vehicle, the total of both flat rate and the per kilometre allowance is a taxable benefit and has to be included in the employee's income.

Please see chapter 2 of the T4130 for more information on combined rates.

Slide 7

The Commission de la construction du Québec (the CCQ) provides in their collective agreement a fixed or lump-sum payment per day if the employee must travel with his personal vehicle. The website of the Association de la construction du Québec indicates that a daily allowance is taxable at the federal level but that the use of the vehicle would be tax-exempt at the federal level and in Quebec. Does the CCQ have special taxation rights or should they follow the same rules as others?

What you are describing is a flat rate allowance, which is a taxable benefit.

A collective agreement does not supersede the Income Tax Act. The Income Tax Act has priority.

The CRA cannot comment on Quebec's legislation. You should consult Revenu Québec.

Slide 8

Are employees able to claim their vehicle expenses against an allowance paid by the employer on their return?

Yes. In many cases, allowances that are not based only on a reasonable per-kilometre rate can later be substantially offset by the employees' expense deductions on their income tax and benefit returns.

Employees who are able to offset their expense deductions can ask to reduce the tax on their remuneration by filling out and sending in the T1213, Request to Reduce Tax Deductions at Source, or send a written request to any tax service office with the following information:

  • the type of employment for which the employee will receive the allowance;
  • an estimate of the total vehicle allowances the employee will receive in the year;
  • an estimate of the business kilometres the employee will drive in the year;
  • an estimate of the employee's vehicle expenses for the year; and
  • the amount for which the employee is requesting the waiver.

If you have a number of employees in the same situation, you can get a bulk waiver for the group. This way, every employee does not have to make an individual request.

Slide 9

An employee has a company leased vehicle and is sent out of town to work for a couple of weeks. They live in a hotel and reports to the office in that city. Is the mileage driven from the hotel to the office considered personal or business?

It depends. If the employee reports to that office on a regular basis, it could be considered a regular place of employment and driving would be personal.

Please call the CRA's business enquiries line at 1-800-959-5525 to discuss this situation as we do not have enough details to provide an accurate answer.

Slide 10

An employee's driving distance from their primary residence to the head office where they reports for work every day is 73 kilometres one way. They were then assigned to a different work site that is 35.6 kilometres away from their primary residence. They travel daily to the work site for over 6 months and claim travel expenses that include mileage and per diem meals. Is this considered a taxable benefit to the employee?

It depends. The new work site could be considered a place of employment where the employee reports for work on a regular basis. In that case, the distance travelled would likely be personal driving and any reimbursement a taxable benefit.

Since we are missing some information for an accurate answer, please call the business enquiries line.

Slide 11

If an employer pays 64¢ per kilometre, can they consider 54¢ as reasonable and the difference as taxable? What is reasonable and what is not reasonable?

The rates per kilometre are prescribed in section 7306 of the Income Tax Regulations. They are 54¢ per kilometre for the first 5,000 kilometres and 48¢ after that.

In the Northwest Territories, Yukon, and Nunavut, there is an additional 4¢ per kilometre allowed for travel.

If you pay your employee an allowance based on a per-kilometre rate that we do not consider reasonable (because it is either too high or too low from the prescribed rates), it is a taxable benefit and has to be included in the employee's income.

If you believe the rate you pay is reasonable, maybe because gas is more expensive or less expensive in your area, be prepared to justify your decision to the CRA.

Slide 12

Can the CRA clarify the rules around reporting personal kilometres on a company vehicle when the employee does not report to an office of the employer (the employee works from a home office)?

The same rule would apply here. The employee must keep a logbook to record the kilometres driven for business and for personal reasons. The logbook should also include the date and the reason for travel.

Slide 13

If an employee has a company fuel card to do business with their personal vehicle, is this a taxable benefit?

This is part of the operating expenses of the vehicle. When it relates to the personal use of the vehicle, it is a taxable benefit. A logbook is necessary to distinguish business use from personal use.

There are two methods to calculate the operating expenses. Please see chapter 2 of the T4130 for explanations.

If the employee reimburses you in the year or no later than 45 days after the end of the year for all actual operating expenses (including the goods and services tax/harmonized sales tax (the GST/HST) and the provincial sales tax (the PST)) attributable to the personal use, you do not have to calculate an operating expense benefit for the year.

If the employee reimburses you for part of the automobile operating expenses in the year or no later than 45 days after the end of the year, deduct the payment from the operating expense benefit that you calculated.

Slide 14

Please explain the different methods for calculating the taxable standby charge on personal use of a company vehicle, and other requirements.

The standby charge is the purchase cost or the lease cost of the automobile plus the number of days the automobile is available to the employee plus the number of kilometres driven for personal reasons.

There are two methods: the simplified calculation and the detailed calculation. Both are found in the RC18, Calculating automobile benefits.

The CRA has an automobile benefits calculator online to calculate the standby charge that will help you fill out the form RC18. We also have recorded webinars on the CRA website on the automobile benefit that can help you understand the standby charge.

Slide 15

I understand that employees are to be taxed on their benefits as they occur. For employees with use of a company vehicle, in the first year, the percentage of personal versus business use is not known until the end of the year when the ratio is calculated. What should be done in this situation?

The benefit is calculated using the kilometres driven for personal reason. The employee should provide the employer with a logbook indicating the total kilometres driven in a year, the kilometers driven for business reasons with the date, and the reason for the business use. This cannot be determined with accuracy until the end of the year.

You will then have to include the amount of the benefit on the employees' T4 slips that you provide to them by February 28 of the following year.

Slide 16

Is the carbon tax, which Alberta implemented in 2017, considered a taxable benefit? In other words, if the employer pays the employee's fuel and records the taxable benefit with payroll deductions, will this now include the carbon tax portion of the bill?

The carbon tax will be included in the price of the fuel and not calculated separately. Therefore, the total cost of the fuel is used to calculate the taxable benefit.

Slide 17

Are 407 Express Toll Route (ETR) reimbursements (travelling to and from work) taxable benefits for employees?

Yes, it is a taxable benefit when an employer pays for an employee's personal expenses. Travelling to and from work is considered a personal expense.

Slide 18

A company head office is in Edmonton, but the employee's regular work place is in Calgary. The employee came to Edmonton for training and claimed mileage between their hotel and the Edmonton office. Would this mileage be a taxable benefit?

In this case, it would be considered a business trip and not a taxable benefit because the employee was there for training. Do not add the reimbursement to the employee's T4 slip. However, if the training was not related to the employee's job it would be a taxable benefit.

Slide 19

A large utility has on-call staff that may take crew vehicles home to service emergencies over the weekend. There is a business reason for taking the trucks home, and because of the type of vehicle, they cannot be used for personal reasons. Are there any ways to mitigate the tax implications on this?

You have four conditions to fulfill and the employee has to keep a logbook to record the mileage:

  • the vehicle is not defined as an automobile
  • you tell the employee in writing that using the vehicle for personal reasons is not permitted
  • you have a valid business reason for having the employee take the vehicle home at night
  • the vehicle is specifically designed for your business and is essential for your employee's duties

It would not be a taxable benefit to the employee if all those conditions are fulfilled. If the employee uses the vehicle for personal reasons, that portion is a taxable benefit. Again, a logbook needs to be kept to record the total mileage and the business mileage. For more information, see chapter 2 of the T4130, under "Motor vehicle home at night policy".

Slide 20

Does one treat paying mileage or the reimbursement for gas differently or should they be treated the same?

Both are taxable benefits when the vehicle is used for personal reasons. Make sure the employee keeps a logbook to differentiate the business use from the personal use.

If there is no logbook, the CRA will use 20,004 kilometres for the year to calculate the personal use of the vehicle.

Slide 21

For an automobile taxable benefit, can a company use the average lease cost of all automobiles, even if vehicles are actually assigned to each employee, rather than randomly chosen.

Operating costs for a fleet of automobiles may not be pooled or averaged for the purpose of determining the benefit. The operating costs that apply to personal use of an automobile must be calculated and attributed to the specific employees on the basis of the actual personal use made of the employer's automobiles.

For more information see, paragraph 19 in the archived IT63R5, Benefits, including Standby Charge for an Automobile, from the Personal Use of a Motor Vehicle Supplied by an Employer - After 1992.

Slide 22

What nuance should be made if the benefit/fixed allowance for auto expenses is non-taxable for a commission employee? What are the fiscal impacts (auto expenses, depreciation)?

If the benefit is truly non-taxable, no amount should be included in the employee's T4 slip.

Slide 23

In calculating the taxable benefit for personal use of an employer vehicle, why is it necessary to track business use and all stops in addition to personal use? Can you just not track one and then, by default, the rest is calculated?

I noticed in January 2017 that the online calculator for this same taxable benefit did not calculate properly for employees who had over 50% personal use. When will this be corrected?

You can calculate the taxable benefit as follows: the total mileage from the odometer at the beginning and the end of the year must be recorded. When the mileage for business use is properly recorded in a logbook, then you can deduct the personal use by subtracting the business mileage from the total kilometres driven during the year.

I verified with the section responsible for the online calculator and they tested the calculator with the limited information your provided. They did not see any problem with it. If you experience more problems, please contact the CRA's business enquiries line.

Slide 24

If the company pays the gas for the employees, will that be a taxable benefit?

If the employer pays for gas when employees use the vehicles for personal reasons, then yes, it is a taxable benefit. However, if the employer pays for gas when the vehicle is used for business reasons, it is not a taxable benefit to the employees. If there is a mix of personal and business use, only the personal use will be a taxable benefit. Remember to record the mileage driven in a logbook if the vehicle is used for both business and personal reasons.

Slide 25

Are employers required to reimburse staff for using their own vehicles for food delivery purposes, if they are paid wages?

Employers are obliged to pay employees what is required by the law in their province or territory. Check the labour laws in effect in your province or territory.

Slide 26

If an employee makes personal use of an employer's equipment, such as a snowmobile or watercraft, how would the value of the benefit be determined?

If the vehicle is used for personal purposes, you have to estimate the fair market value of your employee's personal use, including the GST/HST. The fair market value would be the amount someone would pay in an arm's length transaction for the use of such vehicle.

For more information, see chapter 2 of the T4130, under "Benefit for motor vehicles not defined as an automobile," and paragraph 23 of the bulletin IT63R5.

Slide 27

A popular subject that generates a lot of questions: parking benefit.

Slide 28

Our company pays a fee for a parking spot, and two employees are sharing it, each using it for one week at a time. Is the employer supposed to calculate this taxable benefit? What if it is not for a full year, but temporary?

The benefit is attributed to one employee only. The two employees will have to make arrangement between themselves for the amount of the taxable benefit. It does not matter if the benefit is temporary. It must be included in income for the period when the parking space was used by the employee.

Slide 29

When is parking a taxable benefit, especially in a situation where there is no cost to park?

When parking is free for employees, it is a taxable benefit. The measure of (at 24:20, remove "a" and continue) the benefit is the fair market value. The cost to the employer is irrelevant. It is the advantage enjoyed by the employee.

You can always determine the fair market value of the parking by looking at available parking in the area. You can use an average price based on available parking lots in the area or use the lowest or highest price you found.

The cost of the parking may be $0 if there are no parking lots in the area that charge for parking.

Slide 30

Our employer covers parking for certain individuals at the director level and above. There is not enough parking available for all employees. Should the fee (for example, $125/month) be considered a taxable benefit for the employee?

If the employer wanted to cover 20% of the fee for parking in the future for all employees, how should that be treated?

Parking is always a taxable benefit, except if the vehicle is needed to fulfill employment duties or if the employee is disabled. It does not matter if you are the Chief Executive Officer of the company or a mail clerk. The fair market value of the parking is included in income.

When an employee pays for a portion of the fees, only the portion paid by the employer is included in income. Like any other benefit, when an employee pays an amount, that amount is not included in the taxable benefit.

Slide 31

If you hire a staff member who is required to make daily bank deposits and pick up the mail, is parking that is provided for that employee considered a taxable benefit?

It would be considered a business expense since the employee is using his vehicle for their duties of employment.

Slide 32

Is a parking reimbursement for an employee who drives to the office once a week and claims parking expenses considered a taxable benefit to the employee?

Yes, it is a taxable benefit since driving from home to work is a personal expense, as is parking, unless the employee uses their vehicle for their duties of employment.

Slide 33

Should all employees be treated the same with respect to receiving a taxable benefit for parking purposes? We charge a taxable benefit for parking for all employees.  However, we do not charge any taxable benefit for parking for elected municipal officials and for paramedics as they are deemed "essential services." Should all employees be treated the same or are there reasons not to assess a taxable benefit for parking for certain employees?

Everyone is equal under the law. There are only two reasons to exclude a parking benefit:

The person is disabled, meaning someone who has a severe and prolonged mobility impairment and is eligible to claim the disability tax credit, or

The person regularly uses their vehicle for their duties of employment.

Slide 34

Let's talk about insurance plans.

Slide 35

We received a lot of questions about which insurance plans are a taxable benefit and which are not.

Here is a quick summary:

Group term life insurance (GTLI) is a taxable benefit for employees.

Accidental death and dismemberment (AD&D) is also a taxable benefit.

A wage-loss replacement plan is not a taxable benefit, nor is a health care and medical plan.

There are many questions about which part of the payment would be a benefit for an employee. The part that is taxable is the part the employer pays. When an employee pays part of the insurance, it is not a taxable benefit; the only part that is taxable is the employer's contributions to the plan.

Slide 36

We also received questions about including the GST/HST in the calculation of the benefit. Also, what to do if the person is a shareholder?

When an insurance plan is a taxable benefit, you do not have to include the tax.

And what if the person is a shareholder? Well, it is a question of fact.

Where an employee-shareholder receives a benefit or an allowance in their capacity as an employee, the federal income tax treatment is the same as described in the T4130 for the specific insurance product. Where an employee-shareholder receives a benefit or an allowance in their capacity as a shareholder, the value of the benefit or allowance is included in the shareholder's income under subsection 15(1) of the Income Tax Act.

Slide 37

Can you explain which medical expenses can be claimed and which cannot?

There are too many expenses and I cannot list them here.

Consult the RC4065, Medical Expenses, for information on which medical expenses you can claim and which you cannot.

Eligible medical expenses can be claimed on line 330 or used in the calculation for a claim on line 331 of the T1 income tax and benefit return.

You can also see the Income Tax Folio S1-F1-C1, Medical Expenses Tax Credit, for additional information.

Slide 38

Do taxable benefits for applicable employer-paid benefits coverage (for example, life insurance and accident benefits) have to be reported for periods of statutory leave?

The short answer is, it depends. When the insurance is a taxable benefit (like a wage-loss replacement insurance, health care and medical insurance), as long as the employer pays for the coverage, it is a taxable benefit for the employee. Report the benefit in box 14 of the T4 slip and under code 40 in the "Other information" area of the slip.

Slide 39

We received some questions about flexible medical and dental spending accounts.

How do these work?

First of all, in order to decide if this benefit is taxable, you need to determine if the plan under which these employees receive reimbursement of medical and dental expenses qualifies as a Private Health Service Plan (PHSP).  The definition of a PHSP in subsection 248(1) of the Income Tax Act requires that it be an insurance plan, and reimbursements have to be in respect of expenses that would qualify for the medical expense tax credit.  

A private health services plan qualifying under paragraphs (a) or (b) of the definition in subsection 248(1) is an insurance plan and must contain basic elements.

Now, if the reimbursements of dental or medical expenses by the employer are under a plan that does not meet the definition of a PHSP, then these payments are subject to income tax, CPP and EI.

For more information see chapter 3 of the archived IT-339R2, Meaning of 'private health services plan' (1988 and subsequent taxation years).

Slide 40

What if the unused portion of the amount in the health care account is then transferred to the pension plan or group registered retirement savings plan (RRSP) at the end of the year?

When an employee gets a flex benefit paid, it is up to the employee as to where they want it to be distributed, whether it be as a bonus, moved to their RRSP, to their Pension Plan or something else. I want to say that the treatment of the amount will depend on how the employee chooses to receive the benefit. When an employee has either received cash for, or used flex credits to contribute to, a pension plan, the amount should be included in the employee's income as salary or wages when it is received or deposited. Any amounts deposited into a pension plan or an RRSP or a registered education savings plan (an RESP) would be subject to the rules governing the plans.

If the amount is placed into a registered plan such as an RRSP or an RESP, the terms of which require contributions to be made by the plan holder or subscriber, the employee is considered to have received the amount of flex credits allocated to that benefit option and must include that amount in income. In the case of a contribution to an RRSP, the employee is entitled to a deduction to the extent permitted under the rules governing RRSPs. Other benefits available under a Flex Program would be included in an employee's income in the same way as they would if offered separately from the plan, and therefore taxable to the employee. When the employee has a choice of converting the flex benefit into cash, this is both pensionable and insurable.

Slide 41

Are the premiums paid entirely by an employer for a wage-loss replacement plan a taxable benefit? In which box should it be included in the T4 slip? Is it the same in the province of Quebec?

A wage-loss replacement plan is not a taxable benefit. Because it is not taxable, you would not report it on any employee's T4 slip.

The CRA cannot comment on Quebec's legislation. Please consult Revenue Québec.

Slide 42

We do not have sufficient staff to justify a group health benefit plan and require employees to arrange their own with insurance companies. The company is to reimburse the employees when they submit a monthly invoice. What would the tax effect of this be? Is a reimbursement of health insurance to a non-group plan considered a taxable benefit?

The premium or contribution is a taxable benefit if you pay it to a non-group plan that is:

  • a sickness or accidental insurance plan;
  • a disability insurance plan; or
  • an income maintenance insurance plan.

Report the payments in box 14 and under code 40 on the employees' T4 slips.

Slide 43

I have a client who states that they paid in full for one year into an extended medical and dental plan. The employer state that previous bookkeeper says they should be deducting a portion from the employees for their share, but they do not want to take money from them. What is the proper way to do this?

An employer can choose to pay the total premiums of a private health services insurance plan (such as a medical and/or dental plan) for his employees. This is not a taxable benefit to employees as long as all or substantially all of the premiums paid under the plan relate to medical expenses that are eligible for the medical expense tax credit.

For more information, you can look at chapter 3 of the T4130, under "Private health services plan premiums" and the Income Tax Folio S1-F1-C1, which lists the eligible medical expenses.

Slide 44

Are medical bills for independent contractors (small business) tax deductible?

You don't provide enough details in your question but here is what I think you are asking. Eligible medical expenses can be claimed on an individual's income tax and benefit return.

See Income Tax Folio S1-F1-C1, Medical expenses tax credit, for a list of eligible medical expenses that you can claim on your T1 Income Tax and Benefit Return.

Slide 45

The employer pays the benefits for long-term disability, critical illness, accidental death and dismemberment, but the costs are added to box 14 (taxed etc.). If the employee should ever be paid from one of those benefits, would that income be taxable at the time of receipt of the benefit?

When an employee makes a claim for long-term disability benefits, the amounts paid are considered income (taxable) and the payer should issue a T4 slip to that employee to report the amount paid under the insurance contract.

Slide 46

Is the payment of professional liability insurance premiums a taxable benefit in the same way that professional membership dues are? If the professional order requires this insurance to be in force, does this preclude the application of a taxable benefit to the employee?

It is a taxable benefit if the employer pays the insurance. Add the amount in box 44 (union dues, professional dues and similar) of the employee's T4 slip.

Employees can deduct the amount indicated in box 44 on line 212 of their Income Tax and Benefit Return.

Slide 47

When deducting health care or dental benefits from employees' pay, does it come off the gross before taxes?

All deductions related to benefits, like insurance payments, should come off after the income tax, CPP, and EI have been deducted from the employees' pay.

Slide 48

Do you often see T4s where employers have omitted to include a medical insurance premiums paid by employees (box 85)? As these amounts are often not included, the returns are wrong since accountants cannot claim all of the medical fees that their clients are allowed to claim.

We do not have these statistics, but you are correct. Employers should include the amounts that the employee paid on a T4 slip in the "Other information" area. The use of code 85 is optional. However, it would be easier for accountants to make the proper deductions from income if it is indicated on the T4 slip. If the employer do not enter code 85, the CRA may ask the employees to provide supporting documents if they make claims related to code 85.

Slide 49

When paying wage loss replacement to volunteer firefighters, fire chiefs, or members of Council, is it treated as an expense or is it run through payroll and taxed?

If the wage loss replacement plan is a plan that pays benefits on a periodic basis, rather than as a lump-sum, it is not a taxable benefit to employees.

If the plan pays a lump-sum when a claim is processed, it is a taxable benefit. You would have to add the benefit on the employees' T4 slips.

See chapter 3 of the T4130 under "Income maintenance plans and other insurance plans."

Slide 50

In the case of parental or other leave where the employee continues to receive a taxable benefit for group life but earns no wages, how should this be handled? If added to the T4 at year end, it may create a CPP underpayment.

Report the benefit for current employees and employees who are on a leave of absence (such as maternity leave) in box 14, "Employment income," and in the "Other information" area under code 40 at the bottom of the employee's T4 slip.

It may create a CPP underpayment, depending on the employee's tax situation at the time, but the policy dictates that it is the proper way to report the benefit.

Slide 51

A current collective agreement states that an employee who has completed ten years of service with a company and is entitled to, and in receipt of, a company pension shall be provided with a $4,500.00 life insurance benefit. Is a paid-up life policy/certificate considered a taxable benefit? If taxable, is there another payroll calculation that should be used to avoid having a lot of taxes taken off the employee's net pay, especially federal and provincial income tax? Should CPP, federal, and provincial source deductions be considered?

We do not have a lot of information. Is it a group term life policy? If so, it is taxable. You would include the value of the insurance policy on the T4 slip in box 14 and under code 40. Since the person receives a certificate instead of cash, you have to deduct income taxes and CPP. Do not deduct EI.

Slide 52

If we pay an employee the balance owing on their prescription drugs after the benefit company pays its portion as a condition of their employment contract, is this considered a taxable benefit?

If you pay an employee's personal expense, it is a taxable benefit. Include the benefit in box 14 and under code 40. If you reimburse the employee in cash, and that includes adding the amount to their paycheque, you will have to deduct EI, as well as CPP and income taxes.

Slide 53

We will now review your questions on gifts, awards, rewards, and long-service awards.

Slide 54

If an employee retires and is given either cash, a travel voucher, or a golf membership, for example, are they all considered a taxable benefit?

Yes, you are correct, they would be considered a taxable benefit because the employee is the primary beneficiary. The fair market value of the gift is included in income on the employee's T4 slip.

Slide 55

Can you go over and review taxable benefits on reward points? An employer has run into a situation where reward points collected are not meant to be compensation, but they are a sizeable amount and probably should be taxed.

Your employees may collect loyalty points, such as frequent flyer points or air miles, on their personal credit cards when travelling on business trips, even though you reimburse them for the amounts they spend. Usually, these points can be exchanged or cashed in for rewards (goods or services, including gift cards and certificates).

Slide 56

If the employer implemented a recognition-point-system application from which employees could use their collected points to obtain various items, would the element of "choice" itself render the FMV of the items chosen as a taxable benefit, regardless of the total FMV of all items chosen in any given taxation year? Does the employer use the value that they are invoiced at?

You have to consider all three key concepts when deciding if an item is a taxable benefit. The element of choice doesn't necessarily make it taxable. In this case, we don't have enough information to provide an accurate answer. But I'll mention this: if the points are collected as a reward (see chapter 3 of the T4130, under "Gifts, awards and long-service awards" for a definition of reward), it is a taxable benefit no matter if the points are used for tangible items or are less than $500 because rewards are excluded from the policy. The fair market value of the items must be used, not necessarily what the employer paid for the items.

Slide 57

As long as no other gift or award was given in the same taxation year, would giving employees a $150 dinner-for-two voucher in recognition of a job well-done be considered a taxable benefit?

Yes, it is a taxable benefit. What you are describing here is a reward. The Gift and Award Policy does not include a reward. It is something you give for a job well done, completing a project ahead of schedule or under budget, etc. A reward is always a taxable benefit. The policies are not interchangeable and cannot be used to exclude an otherwise taxable benefit. For example, although you are calling it a voucher, you cannot use the policy for vouchers to exclude a reward. Include the value of the dinner in the employee's income in box 14 of the T4 slip.

For more information, see chapter 3 of the T4130, under "Gifts, awards, and long-service awards."

Slide 58

If an employer is considering paying for a cruise for an employee who is retiring as recognition for their long service with the company, how would this be handled if (1) payment is made directly to the travel company or (2) a reimbursement is made to the employee for the cost of the cruise? Also, if the cruise is to occur after the employee's final work day, how is this handled?

A long-service award can only be given every five years and has a $500 exemption when the gift meets the definition of the long-service award policy. Any amount over $500 is taxable. When cash is given, as in a reimbursement, it is always taxable, no matter the reason why it was given.

It does not matter when the cruise occurs; it is when it is paid that matters. You would include the benefit in the employee's income in the year you paid for the cruise or reimbursed the employee.

Slide 59

If an employer hands out gift cards for long service (for example, for 5, 10, or 15 years of service and so on), are they considered taxable? If so, what deductions apply?

A gift card or gift certificate is always considered a taxable benefit, no matter the reason why it was given, because it functions as cash.

There are no exceptions and no exemptions any of the policies. A gift card or gift certificate does not meet the definition of the policy, and you cannot use a policy to exclude an otherwise taxable benefit. The total amount is included in income and all deductions would apply income tax, CPP, and EI.

Slide 60

I will now answer additional questions on benefits not covered so far.

Slide 61

Many companies provide sports tickets to companies or dealers as an incentive to keep buying their product. These may be used however management chooses. Why are these not taxed?

They are a taxable benefit when an employer gives an employee tickets for personal use. They are not taxable when used for business purposes.

Sometimes an employee needs a ticket to attend a game or an event to be able to perform his or her employment duties. In these situations, the tickets are given to the employee for a business use.

Examples of employment duties may include:

  • promoting and marketing to suppliers or other business contacts;
  • supervising and managing at an event; or
  • performing other specific duties required during the event, including:
    • providing on-call, on-site emergency medical services;
    • conducting in-venue marketing promotions; or
    • training on a product.

Slide 62

Is paying an amount or a flat fee towards an employee's cell phone bill or home internet considered a taxable benefit if they use it for business purposes? What if the employee is a volunteer firefighter?

If you provide your employee with a cell phone (or other handheld communications device) or internet at home to help carry out their duties, the business use is not a taxable benefit.

If part of the use of the cell phone or home internet is personal, you have to include the value of the personal use in your employee's income as a taxable benefit. That applies to volunteer firefighters as well.

If the amount paid to the employee only covers the business use, there is no taxable benefit.

Slide 63

If employees are given a discount (for example, 50%) on the company's products, is that a taxable benefit? If the employer pays an allowance for the remaining portion, is it taxable?

If you sell merchandise to your employee at a discount, the benefit they receive from this is not usually considered a taxable benefit.

If you determine the discount is taxable or you sell the merchandise to your employee below cost, the taxable benefit is the difference between the fair market value of the goods and the price the employee pays.

If you pay an allowance for the remaining portion of this purchase, it is considered as additional remuneration and is taxable for employees. As with any other remuneration, that amount has to be included in box 14 of the T4 slip, and you must deduct income tax, CPP, and EI.

Slide 64

I own business that purchases products at wholesale prices. I was able to purchase a large quantity of e-book readers at 50% off the retail price. I have thought of giving some to my employees. Is this a taxable benefit to my employees? If yes, how do I calculate that benefit?

It depends on the context in which they are given. If they are given as gifts for a special occasion, they may not be taxable. A special occasion is a birthday, a religious holiday, a wedding, etc. If they are given as a reward, they are taxable. See chapter 3 of the T4130 for more information.

If they are taxable, you will have to use the fair market value of the items, not what you paid for them. You would then include the benefit in the employees' T4 slips.

Slide 65

An employer I work for offers a computer purchase program in which employees can buy an electronic device to aid in their work (computer, cell phone, tablet, camera, etc.). The amount is paid back over 10 pay periods. Whould this be a taxable benefit?

If you pay the fair market value of the device, it is not a taxable benefit.

If you pay a reduced price, only the difference between the fair market value and the price you paid is a taxable benefit and should be included in income when you remain the owner of the device, and if it is not left at the employer premises if you leave your employment.

For example, the value of a particular computer is $800 when sold to the public. The employee pays $600 for the same computer. In that case, only the difference of $200 would be a taxable benefit.

Slide 66

We received a lot of questions about RRSPs, RESPs, and tax-free savings accounts (TFSA) contributions from an employer to an employee (for example, when it is taxable and when it is not, and if it is a taxable benefit, is it subject to all deductions like CPP, EI, and income tax?

Contributions you make to your employee's RRSP, RESP, or TFSA and administration fees that you pay for your employee are considered to be a taxable benefit for the employee.

Contributions you make to your employee's RRSPs are generally paid in cash and are pensionable and insurable. Deduct CPP contributions and EI premiums.

However, your contributions are considered non-cash benefits and are not insurable if your employees cannot withdraw the amounts from a group RRSP (except for withdrawals under the Home Buyers' Plan or Lifelong Learning Plan) before retiring or ceasing to be employed.

Although the benefit is taxable and has to be reported on the T4 slip, you do not have to deduct income tax at source on the contributions you make directly into your employee's RRSPs if you have reasonable grounds to believe that the employee can deduct the contribution for the year. You can find more information in chapter 5 of theT4001, under "RRSP contributions you withhold from remuneration."

Slide 67

I am a one-person consulting company (incorporated business) and am wondering what the benefits are of having my company involved in retirement savings plan (RSP) contributions. For example, can the company match my personal RSP contributions? If so, what are the tax ramifications?

Yes, your company can contribute to your RSP, provided you have the necessary room for it. If you have over-contributed to your RSP in a year, you may have to pay penalties, so be sure that the total contributions do not exceed what you are allowed to contribute.

When the company withholds an amount on your remuneration and pays it directly to the RSP, no tax should be deducted. You will not be able to claim these contributions at year-end because no taxes were taken from them; only the amount you personally contributed may be claimed.

Slide 68

With the Ontario Municipal Employees Retirement System (OMERS) new voluntary leave programs, municipalities have the flexibility to pay both the employer's and the member's contributions, meaning employees remain "whole" from a pension perspective. Should the amount of pension paid on behalf of the employee be reported on box 14, 20, and 40? By reporting the amount in box 20, is the taxable benefit offset? For example, if the cost to purchase the leave period (employer portion) is $1,200, should $1,200 be reported in box 14, 20, and 40?

Do not use box 20 to show what you contributed to your employee's pension plan. Your pension plan contribution is a taxable benefit for the employee. Only use code 40 and include the amount in box 14.

For more information see chapter 2 of the RC4120, Employers' Guide - Filing the T4 Slip and Summary, under (at 59:49, remove "filing" and continue) "Filling out T4 slips."

Slide 69

Is a golf and country club membership a taxable benefit?

So, we go back to the underlying concept of who does this benefit the most? The CRA generally takes an "all or nothing" approach. That is, if more than 50% of the benefit accrues to either the employer or the employee, the one who benefits most is considered to be the primary beneficiary, and any ancillary benefit to the other party is ignored.

For example, if you determine that the employee will benefit the most, then it is taxable to the employee. If you believe that you, as an employer, are the primary beneficiary, be prepared to justify your decision if the CRA asks for an explanation of your determination.

For more information, see chapter 3 of the T4130, under "Recreational facilities and club dues."

Slide 70

When an employee pays for their annual professional membership fees and then their employer reimburses them, including the GST and PST, is it taxable? If so, how is it reported on the T4 and can the employer claim back the GST and PST that was refunded to the employee?

If you pay or reimburse professional membership dues because membership in the organization or association is a condition of employment, we consider the employer to be the primary beneficiary and there is no taxable benefit for the employee, so you would not report a benefit on the employee's T4 slip.

If the membership is not a condition of employment, you, as the employer, are responsible for determining the primary beneficiary. You have to be prepared to justify your position if we ask you to do so.

You should tell your employee that he cannot deduct this from his employment income any non-taxable professional dues that you have paid or reimbursed.

You can claim the GST and PST on input tax credits (ITCs) if the expense is related to your commercial activities. For example, if you acquire memberships to resell in the course of your business activities. To find out more, see chapter 5 of the T4130, under "ITC restrictions."

Slide 71

Can you explain what happens when a business trip is continued as a personal vacation?

A business trip is generally not a taxable benefit. When an employee adds a personal portion to the trip, that portion would only be a taxable benefit if the employer pays for it. If the employee pays out of their own pocket for that portion of the trip, it is not a taxable benefit.

When it is taxable, deduct income tax, CPP, and EI.

Slide 72

What criteria should be used to determine if a business trip is a legitimate business expense and not a personal trip? For example, an employer (in the construction business) took his entire crew to a wedding of one of his crew in Costa Rica. It is likely many would not have paid to go. What is the taxable benefit in this case? Similarly, would the trip and the alcohol have been a business expense?

In this case, because the employees' trips were paid to attend a wedding, it would be considered a personal expense and a taxable benefit. The fair market value of the trip would be added to the employees' income (plane tickets, hotel, meals, and other expenses).

If a portion of the trip was for business purposes, for example the crew built a house or a school, only that portion would not be a taxable benefit. You could subtract the amount of the hotel, plane tickets and expenses for the days the crew was there for business purposes from the total of the benefit and include the rest in box 14 and under code 40 of the crew's T4 slips.

Slide 73

An employee is assigned to report for work at a work site (not remote) for three to six months. The employee meets the TD4, Declaration of Exemption – Employment at a Special Work Site, criteria and the company provides board and lodging as per assignment conditions. The employee then claims mileage from the local accommodation to the worksite and back. Would this be considered personal driving and is it a taxable benefit?

You can exclude a reasonable allowance for transportation if you provide board and lodging to the employee for a period of at least 36 hours.

Slide 74

Make a distinction between safety clothing, uniforms and civilian clothing. When you pay for civilian clothes (a pair of jeans) to work in a warehouse or pay for a lab coat to work in a laboratory, is it considered security clothing or a uniform?

A uniform is a garment that is distinctive to the employer, who has a recognizable colour or design, like the UPS uniforms for example, or has embroidered logos on the front and/or back of the garment and that the employee has to wear to perform the duties of employment. Safety clothing, like safety boots and safety goggles, is made to protect the employee from certain hazards associated with the job.

When an employer pays for a uniform or safety clothing, it is not a taxable benefit for the employee. A pair of jeans does not meet any of these criteria and is a civilian garment. If the employer pays for jeans, it would be a taxable benefit for the employee.

You can see chapter 3 of the T4130 for more information.

Slide 75

In a municipal government, are meals that are provided free of charge considered a taxable benefit?

Well, it depends. Are the meals for overtime? Are they subsidized meals? Or are you talking about expenses for elected officials?

Overtime meals are not a taxable benefit if all conditions in chapter 3 of Guide T4130 apply. They are:

  • The allowance or cost of the meal is reasonable, which is $17.
  • The employee works two or more hours of overtime right before or after scheduled hours of work.
  • The overtime is not frequent, only occasional.

Subsidized meals are not a taxable benefit if the employee pays a reasonable charge that covers the cost of food, its preparation, and service.

Elected municipal officials can receive an allowance for expenses, which can cover meals, mileage, cell phone, etc. If the allowance is not more than one-third of the official's salary, it is not a taxable benefit. If the allowance is more than one-third, the excess amount is a taxable benefit. You can find more information in archived IT292, Taxation of elected officers of incorporated municipalities, school boards, municipal commissions and similar bodies.

If the meals you are providing do not fit in any of these three categories, they are likely a taxable benefit.

Slide 76

One of my clients has an annual contract with a service provider where they pay a fixed annual fee. In return, all Canadian employees can utilize their daycare network, hire an in-home sitter, or hire a caregiver for a nominal fee. It is paid directly to the daycare centre or the sitter. Is this still considered a taxable benefit for the employee? How will it affect payroll?

We come back to the underlying concepts of taxable benefits. When an employee gains an advantage, it is a taxable benefit and the fair market value of the benefit must be used to calculate the benefit. In this case, the employees are clearly the primary beneficiary of the services.

Child care is not taxable only if all of the following conditions are met:

  • The services are provided at your place of business.
  • The services are managed directly by you.
  • The services are provided to all of the employees at minimal or no cost.
  • The services are not available to the general public, only to employees.

So, if not all of those conditions are met and it seems that at least the first criteria is not met, it is a taxable benefit. See chapter 2 of the T4130, under “Child care expenses.”

In your example, you mentioned that employees pay a nominal fee for these services. You will have to establish the fair market value of such services. Keep copies of your research in case the CRA wants to see them. The benefit will be calculated as the fair market value minus fees the employees pay. You will include the amount of the benefit at year-end in the employees' income in box 14 of the T4 slip and under code 40 in the Other area of the slip.

Slide 77

Are gift cards donated to the employer (vendor or manufacturer), which are then used as prizes for a raffle for which employees would have to purchase a ticket, considered a taxable benefit? All proceeds of the raffle are donated to a non-profit organization.

As mentioned before, gift cards are always a taxable benefit, no matter the reason why they are given. Also, in your example, you mentioned that the raffle is open to employees only. That is another reason why the prize would be a taxable benefit.

It does not matter that the proceeds are donated. The value of the gift card must be included in the employee's income in box 14 and under code 40 on the T4 slip.

Slide 78

Are there any taxable benefit guidelines for pilots that use their own aircraft for business purposes? Is there an equivalent to the automobile rate of 54ȼ a kilometer for a plane?

There are no equivalent for fuel expenses for planes.

The fuel costs for an aircraft would be part of the business expenses when paid by the owner of the aircraft. See IT522R, Vehicle, Travel and Sales Expenses of Employees, under “Aircraft expenses.”

Slide 79

Shareholder loans from the company. Suppose they are interest-free for 12 months? What if the loans are outstanding for 36 months but never recorded on a T1? Shareholder's loans are a taxable benefit.

The benefit is equal to the interest on each loan or debt calculated at the prescribed rate for the period in the year during which it was outstanding minus the interest for the year that any party (such as the person or partnership) paid on each loan or debt in the year, or no later than 30 days after the end of the year.

The loan cannot be interest-free. The prescribed rate must be used. It is 13% for the first two quarters in a year and 14% for the last two quarters.


The benefit is reported on a T4A slip under code 117. If the loan was not reported on the T1, Income Tax and Benefit Return, you will have to amend it for the three years mentioned. Use the T1 Adjustment Request found on the CRA website or log into My Account and click “Change my return.”

Slide 80

Is a tool allowance still taxable when employees present an invoice for reimbursement?

When an employer reimburses or provides an allowance to employees for the cost of tools that they need for their job, the amount of the reimbursement is a taxable benefit and should be included in the employees' income.

When employed tradespersons file their Income Tax and Benefit Return, they may be able to deduct part of the cost of the eligible tools they bought to earn employment income as a tradesperson.

Employers have to fill out and sign Form T2200, Declaration of Conditions of Employment, to certify that employees must acquire these tools as a condition of, and for use in, their employment.

For more information see the T4044, Employment Expenses.

Slide 81

When non-resident retirees receive taxable benefits from their former employer, who is located in Canada, where should these amounts be reported? I'm told to use a T4A, but the RC4157 clearly states not to use it for "payments to non-residents," and I can't find a clear reference to retirees in the legislative references.

I verified with our section for non-residents and they indicated that the benefits should be reported on a T4 slip.

Withholding tax is required in respect of salaries or wages pursuant to the rules outlined in subsection 153(1) of the Income Tax Act for both residents and non-residents of Canada and T4 information returns are required to be filed pursuant to Regulation 200(1).

Slide 82

How do you report and tax company share purchases that the employer allows employees to make, such as RRSPs, TFSAs, or other non-registered accounts?

When a corporation agrees to sell or issue its shares to an employee, or when a mutual fund trust grants options to an employee to acquire trust units, the employee may receive a taxable benefit. Generally, the employee receives the taxable benefit in the same year they acquire the shares or units, or dispose of their rights under an option agreement. However, when certain conditions are met, the taxable benefit is deferred until the year the employee disposes of the shares.

The taxable benefit is the difference between the fair market value of the shares or units when the employee acquired them and the amount paid, or to be paid, for them.

If the corporation transfers shares directly into an employee RRSP, it would not be a taxable benefit, provided that the employee has the necessary room for the fair market value of the share.

Transfers into a TFSA or other non-registered accounts are taxable because such contributions are made with after-tax dollars.

Include the taxable benefit in box 14 of the T4 slip and under code 38 at the bottom of the slip. For cash outs that the employer chooses not to claim as an expense, also enter the amount under code 86. See chapter 3 of the T4130, under “Security options,” for more details.

Slide 83

If a milk quality bonus is given to a milker, would this become part of their wages, or is it a taxable benefit?

A bonus is not considered a taxable benefit. It is additional remuneration. You would deduct income tax, CPP, and EI. Add the bonus to the remuneration paid during the year and report it on box 14 of the T4 slip.

Slide 84

On occasion, I have a client who gives their employees $100 to buy work boots (the work boots are $250, for example). The employer gives the employee a cheque for $100 and the employee gives the employer the receipt. It is a taxable benefit? The employer insists that they are allowed monies from the company (he is the owner) for purchasing work boots and clothing.

The owner of the company can choose to allocate a certain amount of money for purchasing work boots and clothing. Whether it is a taxable benefit for employees depends if the work boots and protective clothing are a condition of employment. If it is for safety, it is not a taxable benefit when employees are required to present a receipt for the purchase.

If the employer reimburses or pays a reasonable allowance to the employees for the cost of the protective clothing they bought and the employer did not require receipts to support the purchases, the reimbursement is not taxable if all of the following conditions apply:

  • The law requires the employee to wear the protective clothing on the work site.
  • The employee bought the protective clothing.
  • The amount of the reimbursement is reasonable.

See chapter 3 in the T4130.

Slide 85

A roofing company buys coffee for workers on a job site daily. Is this a taxable benefit? It is difficult to identify the amounts paid to each crew member.

The CRA does not require you to keep track of items of nominal value. However, if it is given frequently or shows a pattern suggesting additional remuneration, the CRA may consider such items to be taxable and require that they be included in the employees' wages.

Please contact the CRA to discuss your specific situation.

Slide 86

We have employees who are living in units where they work as building attendants. We pay them a monthly amount. How do we calculate the taxable benefit for their apartment rental? We pay for their cable/phone charges once a month. Is this a taxable benefit?

When an employer pays for an employee's personal expenses, it is a taxable benefit.

Add the fair market value of the apartment, and the telephone and cable charges to the employee's T4 slip. See the "Benefits chart" in the T4130 for more information.

Slide 87

Is there any difference between paying tuition fees for the wife of the employee and the children of the employee? When we pay tuition fees for the children we issue the cheque to the children and the T4A as well. Can the employer do the same if they are paying tuition fees for the employee's wife? Issue the cheque and the T4A to the wife of the employee.

There is no difference. If you provide education benefits to a person other than the employee, such as an employee's family member, you do not have to include the value of the benefit in the employee's income, as long as you deal at arm's length with the employee and the education benefit is not a replacement of salary, wages, or other remuneration. You would report the benefit on a T4A slip for the family member.

Slide 88

If the employer offers all their employees an in-house wellness program (such as, but not limited to, massage/yoga/workouts, etc.), is this considered a taxable benefit? Would employer-subsidized fitness classes be a taxable benefit, provided no gym membership is required?

Yes, it is a taxable benefit. Think of the underlying concepts: the employee would be the primary beneficiary, so it is taxable. If the employee pays the fair market value of the program, there is no taxable benefit.

Slide 89

If you provide an annual food card as a gift at Christmas to staff, is this taxable?

Yes, it is a taxable benefit since the employer paid for a personal expense. Remember that a gift card or gift certificate is always taxable no matter the reason why it is given.

This is not to be confused with a voucher, which an employee can use only to get a specific item, like a turkey for example, for a specific amount of money and nothing else.

Slide 90

A pastor lives in the house owned by the church. What benefit should they receive? At this time the pastor is employed ¾ percent of the time.

The fair market value of the housing should be included in the pastor's income.

An employee who is a member of the clergy, a regular minister, or a member of a religious order can claim the clergy residence deduction if the employee is in one of the following conditions:

  • in charge of, or ministers to, a diocese, parish, or congregation; or
  • engaged only in full-time administrative services by appointment of a religious order or denomination.

The pastor can claim a deduction from income using Form T1223, Clergy Residence Deduction.

Slide 91

We are planning to hire a farm labourer and may provide housing for that person. There are two options for housing; one is that we rent a house in a nearby community where the labourer would live, and the other is that we provide a house that is located at our farm. In either option, the labourer would pay no rent or only a small amount of rent. Is housing a taxable benefit for this person?

Yes, it is a taxable benefit. Use the fair market value of the rental unit. If the employee pays an amount, subtract that amount from the fair market value and include the total in the employee's income. You will report the benefit in the employee's T4 slip in box 14 and under code 40.

Slide 92

Let's now review questions on reporting taxable benefits.

Slide 93

Are there any key differences in terms of how taxable benefits and allowances are treated in Quebec versus the rest of Canada?

They are similar for the most part. One example is gift certificates—they are not taxable in Quebec. For questions about how Revenu Québec treats taxable benefits, you will have to contact them as the CRA cannot comment on their policies.

Slide 94

For teachers that are paid on a 10-month basis, but their insurance plan is billed over the entire year, how should the taxable benefit portion be reported?

Your question is not really clear, but I think you are asking about how to report the benefit on a T4 slip. You would report the taxable benefit portion in box 14 and under code 40. It does not matter if the amount is paid over 12 months or 10 months. It is the total amount paid that is included in the T4 slip.

Slide 95

What is the proper way to report employer-paid and employee-paid benefit coverage? In which box does the taxable benefits appear on T4s?

First, if an employee pays an amount towards a benefit received, it is not a taxable benefit. Do not include it in the T4 slip.

The portion the employer pays is included in income in box 14 and under a specific code in the "Other information" area of the T4 slip.

You can consult the "Benefits chart" in the T4130 for information on how to report a taxable benefit. The chart indicates which code to use for a specific benefit. For example, a gift is reported using code 40 and an automobile stand-by charge is reported using code 34.

Slide 96

An employee owns a car but the employer pays for the insurance and the gas. Which box in the T4 needs to be filled in? What is considered an expense when completing a personal tax return?

As mentioned, a logbook has to be maintained to separate the business and personal use of the vehicle. The personal use is a taxable benefit. Deduct CPP and income tax, but no EI.

The taxable portion of the operating expenses is included in the employee income in box 14 and recorded under code 34.

If the employee use a motor vehicle for both employment and personal use, they can deduct only the percentage of expenses related to earning income. However, if the employer paid for those expenses, the employee cannot claim them on their tax return, unless the amount paid by the employer is less than what the employee paid for. In this case, the difference can be claimed.

Slide 97

When the employer pays half of a medical services plan, does the employer report this on the T4 and, if so, in what box?

Health care and medical insurance premiums paid by an employer are not a taxable benefit for an employee. You do not need to report it on the employee's T4 slip.

(Note: This applies to medical and/or dental insurance plans in general and does not refer to any provincial plan.)

Slide 98

What is the best method when a taxable benefit has been overstated on T4? Is there a minimum that doesn't need to be included (for example, less than $50). What if an overpayment of benefits is forgiven? Should it be included in box 14 and 40? In some cases this error has happened over multiple years? Should each year be amended or should a letter be submitted that lists the amounts for each year?

You would have to amend the employee's T4 slip to remove the amounts included in error for each year that it was overstated.

If you forgive an amount that was overpaid to an employee, it must be included in the T4 slip in the year it was forgiven. The forgiven amount is considered additional remuneration and should be included in box 14 of the T4 slip.

Slide 99

When we add a taxable benefit to a T4 at year end it is subject to CPP, how do we collect the CPP owed? Do we leave the CPP as the wrong amount and wait for the pensionable and insurable earnings review (the PIER review)? For example, a taxable benefit for personal use of an automobile in box 34—we don't know the amount to put in that box until the year is already completed, yet it is subject to CPP.

If you provide a taxable benefit to an employee during the year, you can collect the CPP on the employee's next paycheque.

For automobile benefits, you can request that your employees submit their logbooks monthly. You can then estimate the CPP to deduct on the employees' paycheque and estimate the CPP for the last month based on an average during the year. That way, you can spread out the CPP deductions over the year.

Slide 100

When should an employer issue a T2200, Declaration of Conditions of Employment (more details)?

There is no instruction as to the date but the employee must have a copy in case the CRA asks the employee to see it.

Slide 101

How do I complete question 7 of the T2200?

Question 7 asks if you required that an employee pay for other expenses for his employment. For example, you asked your employee to buy a drill for their duties of employment, but you did not reimburse the employee for this purchase. This is what you would add at question 7 if a similar situation happened. If not, leave it blank.

Slide 102

You can find all the information we discussed today in the T4130, Employers' Guide – Taxable Benefits and Allowances.

Slide 103

This is all the time we have. Thank you for joining me today. I hope that the questions and answers we reviewed during this webinar will help you meet your payroll obligations.

Thank you for watching.

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