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Remembering Taxable Benefits
| Guest post by: Brenda Parker |
Article Overview: An overview of taxable benefits.
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Free Download - Accounting - Beyond the Tax Return By Brenda Parker |
Remembering Taxable Benefits
At one time, employee renumeration was pretty straight forward . Most workers either worked for a given rate per hour or received a salary for the position in the form of a paycheque. That's where it stopped. However, times have changed and many jobs come with extra perks such as life insurance, use of a company car, meals, travel allowances, gifts , employee stock options, and the list goes on and on. Payroll processing is no longer a simple matter of tracking what is paid to the employee. It also involves tracking what is paid on behalf of the employee. At the end of the calendar year, the additional perks must be valued and included in income on the employee T-4 slip where applicable. Furthermore, many of these benefits are subject to CPP and EI and can also affect the HST reporting for the business.
As an employer you should become familiar with what is taxable and what is not. Check with your tax professional or the Canada Revenue Agency if you are unsure of how to handle various situations. The last thing that you want is to have an auditor tell you that earnings were understated and therefore, your employees will be issued amended T-4s. Depending on the nature of the benefit, the reassessment may be quite substantial.
Here is an example of one of the hot topics. Do the terms "standby" and "operating" benefits associated with the employee use of employer owned automobiles sound familiar?
It is very important to keep a log which records business and personal kilometers on a vehicle. A common trap occurs when the employer or employee do not realize that travel from home to their place of business and back is considered personal travel. Should you become subject to an audit down the road, CRA may request the log to support your calculations. The Canada Revenue Agency is currently reviewing the log requirements.
You have probably also heard of some of the rules and conditions surrounding meals and gifts provided to employees. However, some of the benefits that are often not considered or get missed are life insurance premiums paid for an employee or interest free or low interest loans given to an individual because of an office, employment or shareholding. Also, with the increasing use of credit cards which provide reward miles or points, any personal benefit derived from the use of these points for trips or prizes is taxable. Even employee uniforms paid for by the employer could, under certain circumstances, be taxable.
Another example is training. When it is mainly for the employer's benefit, whether or not it leads to a degree, diploma or certificate, there is no taxable benefit. However, if there is no perceived benefit for your business and the benefit is of a personal nature for your employee, the benefit is taxable.
This article only scratches the surface of what is involved when considering taxable benefits. My purpose is to make you aware as an employer or as an employee that the perks also come with extra consideration when it comes to reporting employee wages and benefits. Be proactive to avoid headaches down the road.
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Article Tags: income tax, T4, taxable benefits
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About the Author: Brenda Parker RSS for Brenda's articles - Visit Brenda's website
Brenda Parker operates Scotia Accounting and Tax Services located in Stellarton, NS, Canada. After graduating summa cum laude from St. Mary's University in Halifax with a B Comm in Finance and a BA in Economics, she worked for a national grocery firm in various departments with her last role being assistant manager of Taxation. During this time she attained her Certified General Accountant's designation. Since getting her CGA, she has worked in various management/accounting positions for government ,public accounting firms, and as controller of a regional hotel chain and a new car dealership. She is a Simply Accounting Certified Consultant and Quickbooks partner. In her accounting practice she has served both large and small clients in a wide variety of sectors. From personal taxes to businesses in manufacturing, wholesale, retail and services to charities and not-for-profit organizations. She has clients from Cape Breton Island, NS to Montreal, Quebec to Calgary, Alberta and in many locations in mainland NS. All information in her articles is offered without prejudice and she advises readers to consult a professional accountant in person in regards to their personal situations. Click here to visit Brenda's website   Whats New for 2009 Personal Tax Returns Bartering 101 Tax Implications Home Renovation Tax Credit Back to School tax tips 2 Back to School tax tips 1 |
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