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1

Determine which item is an allowance, a taxable benefit or an expense reimbursement as well as if it is subject to CPP, EI or IT
1. Company paid Group term life insurance
2. Reasonable mileage reimbursement for business travel
3. Car Allowance
4. Company paid accidental death and dismemberment
5. Mileage paid at .55/ km for business travel over 5000 km

1. Taxable benefit, subject to income tax and CPP but not EI
2. Expense reimbursement, not subject to any deductions, simply added to net pay
3. Allowance, fully taxable, subject to CPP and EI
4. taxable benfit, value of the premium is subject to Income tax and CPP but not EI
5. amount over and above reasonable km amount set out by CRA is taxable to the employee

2

Sally has the use of a company vehicle, her vehicle log showed she drove 39,805 km over the course of the year (365days), 6,510 which were personal km and the vehicle was used for more than 50% business use. The capital cost of the vehicle is set at $29,995 (includes taxes). she is paid bi-weekly.
Calculate the taxable benefit that will be added to her income per pay. show all calculations

1. Availability = 365 days / 30 days = 12.16 or 12 periods

2. standby charge- because sally uses her vehicle for more than 50% business use and her monthly km usage is less than 1667 km per month (or 20,004 km per year) she can apply the reduced standby charge

6510/ (1667x12) x (2% x 29,995 x12)
= 6510/(1667 x 12) x (2%x29995x 12)
=6510/20004 x 7198.80
=.325 x 7198.8
=2339.61


3. Operating cost Benefit = $0.27 x personal km
=0.27 x 6510
=1757.70

4. automobile taxable benefit
2339.61 + 1757.70 = $4,097.31 per year

4097.31 / 26 = 157.59 per pay period

sally will have $157.59 added as a taxable benefit each pay

3

Explain why a taxable benefit that is usually pensionable and insurable does not have CPP or EI deducted

when an employee has reached their yearly maximum pensionable earnings (YMPE) limit they no longer have to pay CPP contributions, the same goes for when they reach their maximum EI premium deductions. Therefore no CPP or EI will be deducted

4

What does uniforms and special clothing become a taxable benefit?

This becomes a taxable benefit when the employer or the law does not require a specific type of clothing but will pay an employee an allowance.

5

Paul yearly salary is $40,000 per year and is paid semi-monthly. he receives a taxable benefit for group term life insurance that is 2x his annual salary. The coverage is $1.50 per $1,000 of coverage. His employer pays 100% of the insurance coverage. what is the taxable amount per pay? please show all calculations.

$40,000 x 2
= 80,000 x 1.50 / 1,000
=120,000 / 1,000
=$120

per pay:
= 120 / 24
=5.00 per pay

6

True or false
group health insurance benefits are a taxable benefit

False

7

ABC company has the following people on staff. All staff is paid on a bi-weekly basis. they do not receive any additional benefits or pay. Calculate CPP contributions

name age salary job status YTD contr.
bob 32 $2,800 biweekly FT 2,400


BOB
$2,800
- 2 pay periods in month

CPP exemption: $134.61 per pay
Contributory earnings: 2,800 - 134.61
$2,665.39 per pay
CPP contribution employee: 2,665.39x 4.95% =$131.94 per pay
employer contribution: 131.94
Total remittance to CRA:
the maximum contribution is 2,424.40 and he already contributed 2,400 so he can only contribute 25.50 total to remit to CRA = 25.50 + 25.50 = 51.00

8

ABC company has the following people on staff. All staff is paid on a bi-weekly basis. they do not receive any additional benefits or pay. Calculate CPP contributions

alice age 17 $500 monthly pt 0.00 CPP contributions to date

Alice turns 18 on oct 15

she would not pay CPP as she is under 18

9

ABC company has the following people on staff. All staff is paid on a bi-weekly basis. they do not receive any additional benefits or pay. Calculate CPP contributions

John 71 $800 monthly pt contributions to date $355

he would not have any cpp deductions as he is 71

10

ABC company has the following people on staff. All staff is paid on a bi-weekly basis. they do not receive any additional benefits or pay. Calculate CPP contributions

Fred 40 $1,000 weekly ft contributions to date $2,375

gross pensionable earnings: 2,000
2 pay periods in a month
(Bi-weekly salary 1,000 x 52 = 52,000 / 26 = $2,000 per pay )

CPP exemption per pay period: 134.61

Contributory earnings: 2000 - 134.61 = 1865.39 per pay

cpp employee contribution: 1865.39 x 4.95% = 92.34 per pay
employer contribution: 92.35 per pay

Fred has already contributed 2375.00 so far so he can only contribute 50.50 more to reach his maximum

total to send to CRA 50.50 + 50.5 = 101.00

11

What is the purpose of both federal and provincial TD1?

They are used by the employee and employer to determine the amount of federal and provincial tax to deduct from an individual's taxable employment income.

12

Why is TD1 important to payroll?

it is important to payroll as the signed document is legal and binding, it tells payroll the amount of personal exemptions and employee is entitled to, any additional tax they may request to have deducted. When signed it also tells CRA that the employee has made these requests and that they are liable for its accuracy.

13

When does an employee have to fill out a new TD1?

if an employee has more than basic exemption on their TD1 forms they must fill out a new one each year in case their tax situation changes.

14

Canada Revenue determines the frequency in which employers are required to remit their source deductions. List the frequencies.

1. Regular
2. Quarterly
3. accelerated remitter (threshold 1 and 2)

15

How does cra determine which remittance frequency an employer is to use?

CRA uses the AMWA (Average monthly withoholding amount). This is based on the employer's AMWA 2 years prior. for example an employer's 2013 AMWA will determine what frequency they will use in 2015

16

Sally Smith is due to be paid the following on Jan 2, 2012: her weekly salary of $1,200, overtime $200, 4% vacation on her overtime, a taxable car allowance of $75 and a group life insurance non cash taxable benefit of $15.75. sally pays into company's Registered pension plan of 4% of her weekly salary and she also pays union dues of $8.00 each pay. using this information determine her gross taxable income and her net taxable income.

Gross income:

salary, 1,200 + OT 200 + car allowance $75 + 4% vacation on OT 8.00 + life insurance $15.75
= 1,498.75

Deductions from gross taxable income:

group pension(1,200 x 4%) 48.00 + union dues 8.00 = 56.00

Gross taxable income

1,498.75 - 56.00 = 1,442.75

17

Jennie receives a weekly salary of $950. she is not entitled to overtime pay. however, she receives a bonus of $500. She is in claim code 1 and on her signed and dated TD1 she requested an extra deduction of $25.00 of income tax each pay. please calculate the income tax to be deducted this pay. please show all work

$500/52 = $9.61
$950.00 + $9.61 = $959.61
Federal tax on $959.61 = $106.95 Provincial Tax on $959.61 = $54.90
Federal Tax on $950.00 = $105.25 Provincial Tax on $950.00 = $54.15
Difference in Taxes
Federal Tax $106.95 - $105.25 = $1.70 Provincial Tax $54.90 - $54.15 = $.75
Bonus Tax
Federal $1.70 x 52 = $88.40 Provincial Tax $.75 x 52 = $39.00
$88.40 + $39.00 = $127.40
Tax on Weekly Salary
Federal Tax $105.75 Provincial Tax $54.15
$105.75 + $54.15 = $159.40
Total Tax To Be Deducted This Pay
$127.40 + $159.40 + $25.00 = $311.80

18

Roger Thumb works in Ontario at a manufacturing company. His hourly rate of pay is $31.50 and he works 40 hours per week, he does not work any overtime. He is paid biweekly. Effective pay period 7 Roger received a rate increase to $32.75 per hour. The new rate should have been effective pay period 1 therefore his company is giving him a retroactive payment with his pay on pay period 7 to cover the difference in wages he should have received since the beginning of the year. The payment will be made on a separate deposit from his regular pay. Calculate the net pay for his retroactive increase. He signed his TD1 form with claim code 2. Show all calculations. Once you have completed your answer, go to CRA’s PDOC and perform the same calculations. Explain what you found in your answer.

Difference in rates = $32.75 -$31.50 = $1.25
Roger works 80 hrs in a two week period, and will receive retroactive pay for 6 full pay periods (he will receive the new rate on pay period 7 therefore no calculations need be done on that pay period)
80 hrs x 6 pay periods x $1.25
=$600.00 total retroactive pay

Taxes on old wage rate:
80 hrs x 31.50 = $2520.00
Fed tax = $341.65 Prov tax = $164.10

Taxes on new wage rate;
80 hrs x $32.75 = $2620.00
Fed tax = $362.75 Prov tax = $172.90

Difference between old tax rates and new tax rates:
Federal $362.75 - $341.65 = $21.10
Provincial $172.90 - $164.10 = $8.80

Tax to be paid on retro:
$21.10 x 6 pay periods = $126.60 federal tax plus
$8.80 x 6 pay periods = $52.80 provincial tax
Total tax on $600 retro payment is = $179.40

CPP = $600 x 4.95%
$29.70
*the cpp exemption is not taken here because this is a second deposit made in one pay period

EI = $600 x 1.88%
$11.28
Net pay on retro payment is =
$179.40 tax + $29.70 CPP + $11.28 EI
=$220.38 total deductions
$600.00 - $220.38
= $379.62 Net retro pay
As you can see the tax amounts you calculate using the tax tables will differ from the amounts you get using PDOC. The difference is because PDOC uses actual amounts while the tables use ranges.

19

Using the CRA website please determine the amount of income tax to be deducted from the following-DO NOT USE THE CALCULATOR - PLEASE USE THE ONTARIO TAX TABLES


a) Claim Code 1, Pay frequency – Biweekly Income of $2500.00, $100.00 RRSP, $5.00 United Way and a $200 cash allowance.

Tax = Fed $363.65, Prov $172.70 Total Tax = $536.35

20

Using the CRA website please determine the amount of income tax to be deducted from the following-DO NOT USE THE CALCULATOR - PLEASE USE THE ONTARIO TAX TABLES

b) Claim Code 3, Pay frequency – Weekly Income of $1500.00, $500.00 RRSP and $100.00 non-cash allowance.

Tax = Fed $127.75 Prov $64.70 Total Tax = $192.45

21

Using the CRA website please determine the amount of income tax to be deducted from the following-DO NOT USE THE CALCULATOR - PLEASE USE THE ONTARIO TAX TABLES
c) Claim Code 1, Pay frequency – Semi monthly Income of $6500.00 and a $500.00 cash allowance.

Tax = Fed $1489.15 Prov $876.05 Total Tax = $2365.20

22

Using the CRA website please determine the amount of income tax to be deducted from the following-DO NOT USE THE CALCULATOR - PLEASE USE THE ONTARIO TAX TABLES
d) Claim Code 1, Pay frequency – Monthly Income of $9500.00, $200.00 union dues, $5.00 United Way, $200.00 Cash allowance and $200.00 non-cash allowance.

Tax = Fed $1782.45 Prov $998.95 Total Tax = 2781.40