Canadian Payroll Reporter - sample

News Published 12 times a year by Thomson Reuters Canada Ltd. Subscription rate: $179 per year Customer Service Tel: (416) 609-3800 (Toronto) (800) 387-5164 (outside Toronto) Fax: (416) 298-5106 E-mail: carswell.customerrelations @thomsonreuters.com Website: www.carswell.com One Corporate Plaza 2075 Kennedy Road Toronto, Ontario, Canada M1T 3V4 Director, Carswell Media Karen Lorimer Publisher/Editor-in-Chief Todd Humber Editor Sheila Brawn sbrawn@rogers.com Editor/Supervisor Sarah Dobson Marketing Manager Robert Symes rob.symes@thomsonreuters.com (416) 649-9551 Circulation Co-ordinator Keith Fulford keith.fulford@thomsonreuters.com (416) 649-9585 Payroll Reporter Can R Can R adian adian a www.payroll-reporter.com ©2016 Thomson Reuters Canada Ltd ISBN/ISSN: 978-0-7798-2810-4 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, photocopying, recording or otherwise without the written permission of the publisher (Carswell, a Thomson Reuters business). Return Mail Registration # 1522825 | Return Postage Guaranteed Paid News Revenue Toronto Canadian Payroll Reporter is part of the Canadian HR Reporter group of publications: • Canadian HR Reporter — www.hrreporter.com • Canadian Occupational Safety magazine — www.cos-mag.com • Canadian Payroll Reporter — www.payroll-reporter.com • Canadian Employment Law Today — www.employmentlawtoday.com • Canadian Labour Reporter — www.labour-reporter.com See carswell.com for information October 2016 | CPR allowance if the employer al- lows the employee to continue taking part in its benefits plan. True or False? True and false, depending on the benefits plan and whether it allows employees to continue to accrue pension credits after re- tirement. In Interpretation Bulletin IT- 337R4, Retiring Allowances, the Canada Revenue Agency (CRA) states that, "Continued partici- pation in a former employer's health plan (for example, pro- viding medical, dental and long term disability coverage) for a restricted period of time would not, in itself, indicate that em- ployment has not terminated, particularly if the employer's plan specifically permits former employees to be covered under the plan." However, the CRA adds that if the individual can continue to accrue pension benefits, "the accrual indicates that there is an existing employment relation- ship, since such benefits only ac- crue to employees." If there is an employment rela- tionship, payments made to the individual do not qualify as retir- ing allowances. Payments will not qualify as a retiring allowance if an employer pays them before an employee's employment ends. True or False? True and false. For amounts related to retirement (i.e., in rec- ognition of long service) to qual- ify as a retiring allowance, the employer must make the pay- ments on or after an employee retires, not before. Amounts related to the loss of an office or employment may qualify as a retiring allowance even if the employer pays them before employment ends if there is "evidence that the loss is not speculative or contingent, and that the severing of the employ- ment relationship, including the cessation of all employment benefits, will occur on a spe- cific date," the CRA states in IT- 337R4. Wages in lieu of notice pay- ments required under employ- ment standards laws qualify as a retiring allowance. True or False? False for federal source de- duction and year-end reporting requirements. The CRA considers wages in lieu of notice payments to be regular employment income, subject to CPP, EI and income tax deductions and reported in box 14 on a T4. True for Quebec provincial source deductions. Employees who receive pay in lieu of notice under Quebec's Act respecting labour standards are deemed to be in receipt of a "compensatory indemnity." Under Quebec's Taxation Act, this type of payment is a retiring allowance and not employment wages. Employers should not de- duct income tax from a retir- ing allowance paid directly to a former employee if his or her total annual earnings are less than the total amount claimed on a form TD1, Personal Tax Credits Return. True or False? False. Even if an individual's total earnings during a calendar year, including the retiring al- lowance, are less than the total amount he claimed on a TD1, employers must deduct income tax from a retiring allowance paid directly to a former em- ployee. The Income Tax Act limits the amount of a retiring allowance that an employee may transfer without tax deductions to an RPP or an RRSP to $2,000 for each year before 2000 that the employee worked for the em- ployer. True or False? False. To calculate how much may be transferred tax-free, the CRA uses the following formula: a) $2,000 for each calendar year (or portion) before 1996 during which the em- ployee was employed by the employer plus b) $1,500 for each calendar year (or portion) before 1989 that the employee did not belong to a company pension plan, pension fund or deferred profit-sharing plan or did belong, but the employer's portion was not vested in the employee when the employer paid the retiring allowance. The $1,500 amount can be pro- rated according to the per- centage of vesting. If an employee requests it, employers may transfer some or all of the retiring allowance to an RPP or an RRSP without tax deductions. True or False? True for employees with years of service before 1996. They may request that the employer trans- fer all or part of their retiring al- lowance to their RPP or RRSP. The portion transferred is not subject to income tax deduc- tions as long as the employer di- rectly transfers it to the RPP or RRSP. The amount transferred is commonly called the "eligible" amount. The amount that can- not be transferred without tax deductions is called the "non- eligible" amount." For year-end reporting, the non-eligible portion of a retir- ing allowance must be includ- ed in box 14 on a T4. True or False? False. Do not include retiring allowances in box 14 on a T4. Report them in the "Other Infor- mation" area of the T4, using the applicable codes. Use code 66 to report the portion eligible for transfer to an RPP or RRSP even if it is not transferred. Use code 67 to report the non-eligible portion. If the employee is a Status In- dian, use code 68 to report the eligible amount and code 69 for the non-eligible portion. For Revenu Québec year- end reporting, report the entire amount of a retiring allowance in box O on an RL-1. In the code box (case O), enter code RJ. If you got all or most of the questions correct, congratula- tions! You definitely know your retiring allowance responsibili- ties. from TRUE/FALSE on page 3 Make payments on or after employee retirement

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