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Reporting tax-exempt employment income

Pre-test question

Select True or False

Any employment income earned on a reserve is tax exempt.

  • True
  • False

Instructions

  1. Open the tax software
  2. Review the Background information and Required slips (tax slips, receipts, etc.)
  3. Provide all required information for the appropriate sections of the tax software
  4. Once completed, compare your results with the solution provided
  5. Afterwards, refer to the Takeaway points

Background information

Situation

Christie is a Status Indian under the Indian Act and although she lives off reserve, she works on a reserve so her income is tax exempt. She also received Advanced Canada workers benefit payments.

Identification information

Identification information
Name Christie Keeshig
Social insurance number (SIN) 000 000 000
Address 123 Main Street
City, Province  X0X 0X0
Date of birth January 8, 1980
Marital status Single

Required slips

T4 - Statement of Remuneration Paid (Renewal Ltd.)

T4 - Description below

Text version of the above image

T4 - Statement of Remuneration Paid
Protected B
Employer’s name: Renewal Ltd.
Employee’s name and address:
Last name: Keeshig
First name: Christie
123 Main Street
City, Province  X0X 0X0
Box 12: Social insurance number: 000 000 000
Box 18: Employee’s EI premiums: 225.00
Box 24: EI insurable earnings: 15,000.00
Box 28: Exempt CPP/QPP is ticked
Other information: Box 71: 15,000.00
Box 45: Employer-offered dental benefits: 1

RC210 – Advanced Canada workers benefit (ACWB) statement

RC210 - description below

Text version of the above image

RC210 – Advanced Canada workers benefit (ACWB) statement
Issued by: Canada Revenue Agency
Keeshig, Christie
123 Main Street
City, Province  X0X 0X0
Social insurance number: 000 000 000
Box 10: Total Basic Advanced Canada workers benefit: 759.00

Review your results

Solution to Reporting tax-exempt employment income.

Takeaway points

Steps to follow

  1. Review their background information and required slips
  2. In Interview setup, tick the box next to Tax return for a Status Indian in the Specific situations section and tick the box next to Employment income and employment insurance benefits (T4, T4E/RL-6) in the Employment and other benefits section
  3. Click Status Indian in the left-side menu and select Yes from the Please confirm that you are a registered Indian, or entitled to be registered as an Indian under the Indian Act drop-down menu
  4. Click T4 and employment income in the left-side menu, then click the + sign next to T4 income (earned in any province except Quebec) and enter the required information
  5. Select Exempt CPP/QPP (rare!) from the Exempt (CPP/QPP, EI, PPIP) drop-down menu 
  6. Select Box 71 – Indian (exempt income) – Employment from the drop-down menu in the OTHER INFORMATION section
  7. Click Other information slips in the left-side menu, then click the + sign next to RC210 – Canada workers benefit advance payments statement [Federal line 41500] to enter the information from the tax slip

Even though Christie lives off reserve, her income is tax exempt because it is earned on a reserve and she has Indian status. The software automatically generates Form T90, Income Exempt From Tax Under the Indian Act, which allows Christie to include this income in the calculation of the Canada workers benefit (CWB).

For more information, refer to UFile instructions.

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