CERTIFIED GENERAL ACCOUNTANT
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 84 Moody Street
Port Moody, BC
V3H 2P5
Phone: 604-469-3733
Toll free:
 1 (877) TWHAWES
1 (877) 894-2937
Fax: 604-469-3760 or
1 (866) 901-7775
Cell: 604-626-2066
Email: itfgrs@terryhawes.com

The first rule of a Professional Accounting Practice ...

"Nobody is in a rush for the wrong answer."

- "Take advantage of every tax vehicle that you can, as long as the vehicle is a good investment in its own right." -

- "Real charity does not care if it is deductible or not." -

- "Be committed to your partners' well-being, and they'll be committed to yours." -

► Not sure whether your workers are employees or subcontractors?

It is important to determine if a worker is an employee or self-employed individual, and thus if there is an employer-employee relationship or a business relationship. Each arrangement has its own advantages and disadvantages. For example, in a business relationship you don't have to worry about payroll taxes, benefits and other taxes not to mention legal and other issues that arise in an employer-employee relationship. However, if you're in a business relationship and Canada Revenue Agency sees it as an employer-employee relationship, it could lead to some dire repercussions (you may have to remit the business portion of the payroll taxes with interest and penalties on subcontractors deemed to be employees for the years in question).

When should you complete a T4 slip?

You have to complete a T4 slip to report the following:

• salary or wages

• tips or gratuities

• bonuses or vacation pay

• employment commissions

• all other remuneration you paid to employees during the year

• taxable benefits or allowances

• deductions you withheld during the year

Note: You have to report income on a T4 slip for the year during which it was paid, regardless of when the services are performed or rendered. For example, if a pay cheque dated in January covers income earned in the last days of December, report the income on the T4 slip for the year that starts in January.

Who should you complete a T4 slip?

You have to complete T4 slips for all individuals who received remuneration from you during the  for year if:

• you had to deduct CPP contribution; EI premiums, or income tax from the remuneration; or

• the remuneration was more than $500

What are your T4 responsibilities?

You will need to prepare an information return. To do this, complete T4 slips and the related Summary form. You have to file the T4 information return and give information slips to your employees by the last day of February following the calendar year to which the information return applies. If the last day of February is a Saturday or Sunday, your information return is due the next business day. Penalties and interest If you fail to file the T4 information return on time, the penalty for each failure is $25 a day, with a minimum penalty of $100 and a maximum of $2,500.

• TD1 Form – completed by each employee available at http://www.cra.gc.ca. This provides details of their name, address, Social Insurance Number, and birth date. Accounting
• Summary of earnings and deductions for the year for each employee
• General ledger detail of the payroll account(s)
• Taxable benefits i.e. Auto allowance, medical benefits, other
• CRA PD7A / Total payroll remittances to the Receiver General for the year.
• Workers Compensation Annual Report and details of payments made to WCB during the year

Taxable benefits are benefits provided to employees in addition to salary and wages. These benefits are taxable and are added to employment income with very few exceptions. Taxable benefits are calculated according to a specific set of rules and are usually subject to payroll deductions. Some specific taxable benefits include:

• Personal use of employer’s motor vehicle(s)

• Flat rate auto allowances (not based on number of kilometres driven)

• Unreasonable per kilometre auto allowances

• Combined flat rate and reasonable per kilometre auto allowances

• Transportation provided to and from work

• Overtime meals or meal allowances (provided on a frequent basis)

• RRSP contributions and administration fees

• Premiums for life insurance policies

• Medical premiums paid to a public medical insurance plan or a public hospitalization plan

• Recreational facilities and club dues (limited exceptions)

• Tuition Fees (unless courses are for the purpose of maintaining or upgrading employment-related skills and are mainly for the employer’s benefit)

• Benefits from interest-free or low-interest loans (special rules apply to home relocation loans)

• Personal travel benefits

• Personal income tax return preparation fees

• Financial counseling fees

• Cash and non-cash awards (from manufacturers to dealers that are passed on to employees of the dealer)

What Benefits Are Not Taxable to Employees? Some except ions are specifically provided for; they include:

• Reasonable per-kilometre auto allowances based on the number of kilometres driven in the year (subject to conditions)

• Parking provided by the employer where parking is available to both employees and non-employees or the employer provides scramble parking

• Parking provided to employees for business purposes (where employees have to use their own automobiles or an employer-provided automobile to perform their duties)

• Contributions to registered pension plans

• Premiums under private health services plans (medical and/or dental)

• Premiums paid to group plans for sickness or accident insurance, disability insurance or income maintenance insurance

• Employee counseling fees (if they relate to the wellness, mental or physical health of the employee or persons related to the employee)

• Financial counseling fees for the employee’s re-employment or retirement

• Professional Membership Dues (where the membership is a condition of employment)

• Social events provided to all employees where the cost (including any transportation costs) is not more than $100 per person (if the cost exceeds $100 per person limit, the entire amount is a taxable benefit)

• Gifts – up to two, non-cash, gifts per year for special occasions (limited to a total cost of $500 – including taxes)

• Awards – up to two, non-cash, awards per year for employment-related accomplishments (limited to a total cost of $500 – including taxes)

• Discounts on employee merchandise (some exceptions)

• Subsidized meals provided at a reasonable cost (where the cost of the food, its preparation and service is covered)

• Moving expenses paid or reimbursed (qualifying expenses)

• Protective clothing and uniforms (including laundry)

• Most disability-related employee benefits that relate to parking and transportation to and from work