Reporting tax-exempt employment income
Pre-test question
Sorry, that's incorrect
Only individuals with Indian status may earn tax-exempt employment income on a reserve.
That's correct
Only individuals with Indian status may earn tax-exempt employment income on a reserve.
Instructions
- Open the tax software
- Review the Background information and Required slips (tax slips, receipts, etc.)
- Provide all required information for the appropriate sections of the tax software
- Once completed, compare your results with the solution provided
- Afterwards, refer to Key points of the tax software and the Takeaway points
Background information
Situation
Christie is a Status Indian under the Indian Act and she lives off reserve. All of Christie’s employment income is for work performed on a reserve. She also received Advanced Canada workers benefit payments.
| Category | Value |
|---|---|
| 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.)
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
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.
Key points of the tax software
Important note
To access complete instructions on the various steps of entering data into the software, click on the title of each section below.
Christie's interview
Tax return for a Status Indian
- Click Interview setup in the left-side menu
- Tick the box next to Tax return for a Status Indian in the Specific situations section
- Click Status Indian in the left-side menu
- 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
- Click T4 and employment income in the left-side menu
- Click the + sign next to T4 income (earned in any province except Quebec) in the T4 and T4E section
- Enter the required information from the T4 slip
- Select Exempt CPP/QPP (rare!) from the Exempt (CPP/QPP, EI, PPIP) drop-down menu
- Select Box 71 – Indian (exempt income) – Employment from the drop-down menu in the OTHER INFORMATION section
Advanced Canada workers benefit (RC210)
- Click Other information slips in the left-side menu
- Click the + sign next to RC210 – Canada workers benefit advance payments statement [Federal line 41500]
- Enter the information from the tax slip
Takeaway points
- A Status Indian who lives off reserve can have tax exempt income
- in this case, Christie’s income is tax exempt because she has Indian status and all her income is earned on a reserve
- Tax-exempt employment income is reported in box 71 of the T4 slip instead of box 14
- Tax-exempt employment income is not reported on the tax return
- as a result, Christie’s total income (line 15000), net income (line 23600) and taxable income (line 26000) are all $ 0
Form T90 Income Exempt from Tax under the Indian Act
- The Form T90, Income Exempt From Tax Under the Indian Act is used by the CRA to calculate the Canada workers benefit (CWB) and the Canada training credit limit (CTCL), if an individual is eligible for them
- the tax software automatically reports tax-exempt income on the form
- In this case, Christie’s employment income is reported on form T90 and she is eligible to claim the CWB on line 45300 of the tax return
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