Unit 5 part 2: Taxable benefits

Question 1

What is an automobile allowance?

Answer 1

an allowance you pay an employee for them to use their own vehicle.
This is taxable unless the amount you pay them is considered to be a reasonable per km rate.

Question 2

Are automobile flat rate allowances taxable or non-taxable

Answer 2

usually taxable benefit

Question 3

are cell phone services taxable benefit?

Answer 3

usually it is not a taxable benefit
it becomes taxable if the employee uses the phone for personal use that goes beyond reasonable; goes beyond what the plan covers, the employee does not reimburse the employer for excessive use, and the plan has a fixed cost and considered a standard plan.

Question 4

Are club/ fitness memberships a taxable benefit?

Answer 4

yes, if there is no principal advantage for the employer

Question 5

Are company assets sold to employees taxable

Answer 5

if sold for less than market value they are taxable

the taxable benefit is the difference between fmv and purchase price

Question 6

Are company discounts a taxable benefit

Answer 6

the difference between market value and cost to produce it is taxable
unless the products are old or damaged

Question 7

what are company discounts

Answer 7

when employees can purchase products below the cost of manufacturing it

Question 8

when is a company discount not taxable

Answer 8

if the discount is available to all employees and are above the cost to produce them or if they are old or damaged

Question 9

Are counselling fees a taxable benefit

Answer 9

not if they are for physical or mental counseling, job search counselling for terminated employees, or retirement counseling or job related

Question 10

are frequent flyer benefits taxable?

Answer 10

not taxable if an employer reimburses the employee for flights that generate frequent flyer points when the employee pays for it themselves on personal credit card

Unless,

1. they convert the points to cash or
2. the employee and employer have an agreement that the points reflect part of their earnings or
3. if it is a form of tax avoidance

if so , the cash market value is the taxable benefit
also, if the employee uses the points accumulated on a company credit to travel

Question 11

are Gifts and Awards a taxable benefit

Answer 11

taxable if they are given to an employee by the employer
- they may receive up to $500 per year in non-cash, near cash or cash for special occasions or achievements, anything over $500 is taxable

Question 12

what are some non-cash gifts and awards

Answer 12

sporting event tickets

Question 13

what are some near cash gifts and awards

Answer 13

such as a gift card, can easily be converted into cash

Question 14

Are group term life insurance benefits taxable

Answer 14

any portion of life insurance coverage that is paid by the employer on behalf of the employee is taxable

Question 15

EX. Life insurance taxable benefit
bi-weekly pay period

coverage is $50,000 per year
total cost is $1.00 per $1,000 worth of coverage
employee pays 25%, employer pays 75%
what is the taxable benefit

Answer 15

employee: .25 per $1,000
employer: .75 per $1,000

taxable benefit: 50,000 x (.75/1000) = 37.50 per month

to convert to bi-weekly amount: 37.50 x (12/26) = 17.31 per pay

Question 16

Is group life insurance taxable, pensionable and insurable?

THis is the same for AD&D (Accidental death and dismemberment)

Answer 16

it is taxable and pensionable but not insurable (do not deduct EI)

Question 17

Are meals allowances a taxable benefit?

Answer 17

not if the
1. allowance is reasonable,
2. if the overtime is more than two hours before or after their shift
3. and if it is less than 3 times per week.
All must be met

Question 18

are subsidised meals taxable?

Answer 18

not if the cost is considered reasonable

if not reasonable, then calculation is (actual cost - what employee pays)
difference goes in box 14 and code 40 under other information on t4

Question 19

Subsidised meal not reasonable please calculate the taxable benefit
if the employee pays $3.50 for a meal but the actual cost of the food, its preparation and service is actually valued at $5.50 then what is the taxable benefit

Answer 19

5.50 - 3.50 = 2.00 per meal is recorded on t4

Question 20

Is parking taxable

Answer 20

it is taxable if the employer pays for an employee’s parking at the regular place of business
the taxable amount is FMV - what the employee pays to employer

Question 21

What are the exceptions for parking paid for by the employer at the business. That make it non-taxable

Answer 21

1. not taxable for disabled employees
2. if used for both employees and others such as shopping mall parking lot
3. if you supply scramble parking where there are not enough spaces for all employees
4. if the employee has to use either their own or your vehicle to do their job AND if the parking is for business purposes

Question 22

Are professional membership fees taxable benefit?

Answer 22

not taxable if the employee is required to be a member by the employer who pays the fee

Question 23

If an employer pays for an employee’s RRSP is it taxable

Answer 23

yes plus administration fees are taxable because it is cash it is also pensionable and insurable

Question 24

When are RRSP’s that the employer pays for not taxable?

Answer 24

if the employee is able to use the contributions as a tax deduction on their personal income tax

Question 25

When do employer RRSP contributions become non insurable

Answer 25

if the employee cannot withdraw that amount until they either retire or leave the company (except if the use it for Home buyers or life long learning plan)

Question 26

if the amount of the RRSP is withheld from the employees income is it taxable or non-taxable

Answer 26

non-taxable

Question 27

if the employer allows the employee to contribute RRSPs to a third party financial institution the amount they withhold and forward to the third party is it taxable?

Answer 27

is only a deduction on the employee’s earnings, that taxable deduction they receive does not occur at the source, it occurs when they file their personal income tax

Question 28

if a spouse travels with the employee and their expenses are paid and the spouse is not involved in the business activities is it taxable?

Answer 28

yes

Question 29

are tool allowances taxable?

Answer 29

yes
if it is for tools for their trade, they can request A T2200 declaration of the conditions of employment which they can use to offset the taxable benefit when they file their personal tax return

Question 30

Are uniforms and special clothing taxable

Answer 30

if it is special clothing required for the job it is not taxable
if it is not required by the employer or by law then it is a taxable benefit

Question 31

where are taxable benefits found on a t4

Answer 31

box 14 and the other information boxes

the most common code is 40