When using an employer owned or leased vehicle for personal use, an automobile taxable benefit applies. Automobile taxable benefits should be added to your payroll throughout the calendar year as the company vehicle is used. Benefit calculations from the prior year can be added to the current payroll for purposes of calculating applicable payroll source deductions. Reconciliation of the actual benefit with the prior year’s benefit is suggested towards the end of the current year to ensure an accurate benefit calculation is reported on the T4 and proper source deductions are remitted to CRA.
Recording your personal and business use mileage is getting easier; logbook apps that can be downloaded to a phone or tablet are available to track your mileage. Keeping accurate records is a good habit to get into. It is much easier recording the mileage as incurred, rather than trying to remember and document at the end of the year.
If you use your personal vehicle for work purposes (driving from home to your usual work location is considered personal), your employer may reimburse you for such business use. The 2016 CRA rate for reimbursing such business mileage is .55 cents/KM for the first 5,000 KM’s, then .48 cents/KM for all KM’s after the first 5,000 KM.
When an employee reimburses their employer for half of the premiums cost of a health benefit package the employer is providing, it is not automatically assumed that the half the employee is reimbursing is to cover the taxable benefits portion of the premiums. There should be an agreement between the employer and employee outlining the specific premiums that the employee is reimbursing, to cover the premiums in the package that are considered taxable benefits. Examples of such taxable benefits include AD&D, Critical Illness Insurance, and Group Term Life Insurance Premiums. The balance of the reimbursement from the employee will offset the benefit expense. If the amount that the employee is reimbursing the employer does not fully cover the taxable benefits, the shortfall amount should be included as a taxable benefit.
If an employee has been given a loan or advancement of funds and the balance of the loan or advance is forgiven by the employer, this balance should be included in the employee’s employment income, Box 14 on the T4. If a company pays for an employee’s income tax return to be completed, this is considered a taxable benefit and should be included in income and source deductions calculated accordingly.
Tickets given to employees for sporting or entertainment events for personal enjoyment, not for business purposes, are considered a taxable benefit and are to be taxed at the face value of the ticket. CRA is reviewing companies who purchase tickets to events – proper documentation of who tickets were provided to is key.
T4A Tax Form: Statement of Pension, Retirement, Annuity & Other Income. It would be a good practice to start completing and submitting these forms each year, as CRA will soon make it mandatory. The T4A Summary and slips are to be completed when the following types of payments are given: Pension or superannuation, lump-sum payments, self-employed commissions, annuities, patronage allocations, RESP accumulated income payments, RESP educational assistance payments, fees or other amounts for service or other income. If you are unsure, please consult the CRA website www.cra.gc.ca or contact DSK for more information.
This tax tip is a publication of DSK on developments in the area of taxation. The material is general in nature, is current as of published date, and should not be relied upon to replace the requirement for specific professional guidance. These posts should not be considered advice to be acted upon without further professional consultation, as each reader’s personal financial situation is unique.