Unit 3 Flashcards
Employment income general inclusions
CH6
-Employment income is taxed on a cash basis, in the yr received
Tax benefits and other payments
CH6
1) Counseling: payment for financial counseling is taxable. NOT TAXABLE in respect of mental/physical health & re-employment or retirement of an employee
2) Discounts: if $$<FMV, dif is taxable benefit as long as the discount was received as result of employment
3) Frequent flyer points: taxable if you earn points on a company CC, or employee use own personal CC to earn points. NOT TAXABLE POINTS CONVERTED TO CASH
4) Gifts: taxable if noncash above $500.NON TAXABLE, IF LESS THAN $500
5) Length of service award: NON TAXABLE
6) Health care prep paid by employer (when discretionary for employees): NOT TAXABLE FOR PRIVATE HEALTH CARE.
7)Life insurance: NON-TAXABLE IF THE EMPLOYER IS THE BENEFICIARY
8) Cont to pension plans by employer: NON TAXABLE
9) Rec faciliites or club dues: NON TAXABLE WHEN INCURRED FOR BENEFIT OF EMPLOYER
10)Relocation payment: moving allowances are taxable. NON-TAXABLE IF EMPLOYEES HAS INSTEAD BEEN PROVIDED WITH A REIMBURSEMENT
11) Reim for housing losses incurred for realocation: 1/2 of any reim>15K is taxable benefit to employee
Accident and sickness insurance plans
CH6
-Group plan–> employer and emploee each pay part of the prem–> benefit received:
-EX: employee starts employment in Apr 2022, receives benefit in Sep 2023/ Prep paid between the period are deductible.
Allowance and reimbursements
-Allowances: fixed amount paid by employer to employee without req for the employee to provide receipts
-Generally taxable unless:
1) Motor vehicle exp incurred for employment
2) Travel exp incurred for employment
1)Motor vehicle exp incurred for employment
-Taxable if ANY of the following apply:
1) Allowance is NOT based on KM traveled
2) Employee receives reim and allowance
3) Employee reim $ > CRA limit
-NOT TAXABLE IF:
1) Allowance per KM if the amount within the limit set by CRA–> IF GREATER THAN PRESCRIBED AMOUNT ENTIRE AMOUNT IS TAXABLE
2) Travel exp incurred for employment
-Taxable benefit if allowance is unreasonable high or low
-NON-TAXABLE IF AMOUNT IS REASONABLE. CRA RATES IS $23/MEAL OR $69/DAY
Automobile benefit
-When employer owns the vehicle and pays for operating costs:
Standby+Operating benefit- employee reim
-Employee owns vehicle and employer pays for operating costs
Operating benefit- employee reim
Standby charge
-Assessed when employer provides employee a vehicle.
Reduction in standby charge
-if ALL the following criteria are met:
1) Employer required to use automobile for employment purposes
2)Used for 50%> for employment
3) Personal KM < 20,004 in yr
Standby reduction $
Operating cost-benefit employer-owned vehicle
-Includes fuel, insurance, RM, registration
Operating cost-benefit employer-leased vehicle
Employee loans
-Benefit for employees if the loans are either interest-free or low interest known as the imputed interest benefit
-Interest paid by the loan includes interest paid by Jan 30
-WHEN EMPLOYER FORGIVES THE LOAN NET BALANCE IS CONSIDERED A TAXABLE BENEFIT
Stock options
-Exercise date: if FMV> exercise price an employment benefit arises and should be included in employment income
-Impact of stock options on EI:
a) Taxable benefit: included in employment income (which is included in NIFTP)
b) CG/CL: 1/2 included in NIFTP
c) Division C deduction @50%: deducted from NIFTP to determine TI
Stock options division C deduction
CH6
-Differs between public and CCPCs companies:
-Shrs must be CS and non-arms lengths
Deductions
CH6
1) Legal fees to collect remuneration
owned to an employee
2) Salesperson expense
3) Travel expense
4) Motor vehicle expenses
5) Dues
6) Motor vehicles- including CCA& interest paid on loan
7) Employer RPP contributions
8) Tradepersons tools expense
9) CCP (LESSER OF EI& 64,900-3,500)*5.7%
10) Enhanced CPP (LESSER OF EI& 64,900-3,500) *0.75%)
- Conditions;
a)individual is employed to sell prop or negotiate contracts
b) required to pay for their own exp
c) work away from employer place of busi,
d) fully/partly paid in commission
e) didn’t receive a nontaxable traveling allowance
f) expenses cant exceed the commission received.
Lease cost deduction
CH6
Workspace deduction
CH6
-Deductible if
1) place where the individual principally performs their employment duties
OR
2) both of:
a) If used exclusively for the purpose of earning EI
b) used on a regular and continious basis for meeting customers
Amount from def income plans
CH13
Other reg plans
-Includes RESPs, Reg disability Savings Plans
Cont are not deductible
Dist are not taxable
-ACC INCOME OF THE PLAN IS TAXED WHEN WITHDRAWN IN EITHER THE HANDS OF THE BENEFICIARY OR THE HANDS OF THE CONTRIBUTOR
CPP
-Payment received are taxable and included in income of the individual receiving the payment
-Spouse of CL partners may elect to split CPP income
The amount shared is = 50% combined CPP benefits received prorated by the length they live together
Non-contributing spouse has to atleast 60 to make the election
OAS
-Taxable payments made by the goverment of Canada to 65+ old who lived in Canada for 10+ yrs
-OAS clawback
Childcare limits
Maximum deduction LEAST of
a) Actual amount paid
b) total annual limits
c) 2/3 of taxpayer-earned income
Disability support deduction
-Can claim for ti enable individual to:
1) work as an employee or indep contractor
2) attend a designated educational institue
3) carry on research work which grant was recieved
Disability deduction
Attendant care costs
-Full-time attendant cost > $10K
-Part-time attendant cost < $10K
Personal division C deductions
-Employee stock options
-Loss carryovers
-Northern residence
-Lifetime capital gain exemption
-Guaranteed income supplement
-Social assistance payment
-Workers Compensation
RRSP limit
Earned income for RRSP
