Canadian Payroll Reporter - sample

6 News June 2019 Canadian HR Reporter, a HAB Press business 2019 While errors and omissions can happen with any type of payment, there are certain situ- ations that seem more likely to cause problems, according to the CRA. Each year, it provides the Canadian Payroll Association (CPA) with a list of 10 common- ly reported audit adjustments to employers' payroll for not reporting wages and benefits properly. Here is a look at five of the trouble spots from the 2017 list. The remaining five will be cov- ered next month. Unreported payments to independent contractors: Em- ployers who hire independent contractors must report the fees they pay to them on a T4A, even though there are no source de- ductions taken from the fees. To determine if a worker is an independent contractor, em- ployers can refer to the CRA's guide Employee or Self-em- ployed? (RC4110). Security/stock options: Employers must report a tax- able benefit for employees who acquire security/stock option shares from their employer. The taxable benefit usually arises in the same year that the employee acquires shares, although there are exceptions. The amount of the taxable benefit is based on the fair mar- ket value (FMV) of the shares when the employee acquired them minus the amount the em- ployee paid for them. Employees may claim an in- come tax deduction equal to one-half of the taxable benefit if they meet specified conditions under the federal Income Tax Act. Report the benefit in box 14 on the T4, as well as in the Other Information area, using code 38. If the employee is entitled to a deduction, report it using code 39 or 41, as applicable. The CRA provides more in- formation on stock options in its Taxable Benefits and Allowances guide (T4130). To delve more deeply into the topic, refer to the CRA's Interpretation Bulletin IT113R4, Benefits to Employees — Stock Options. Automobile standby charge and operating expense ben- efit: The CRA's list said employ- ers are not calculating the ben- efit correctly because employees are not keeping proper logbooks that distinguish between busi- ness and personal driving. The CRA advises that the logbooks contain details on the date, name, and address of cli- ents visited for work, as well as the distance employees travel between their home and their clients' places of business. The logbook should also in- clude the total number of busi- ness and personal kilometres the employee drives in the year, and any amounts the employee reim- bursed the employer. The CRA recommends that employers check employee log- books periodically throughout the year. Another issue the CRA raised was that there is a perception that if a vehicle is not an auto- mobile, employers do not have to report a taxable benefit for employee personal use. This is incorrect. Even if the employer-provided vehicle is not an automobile un- der the CRA's definition, there is still a taxable benefit for personal driving. It is equal to the FMV of the employee's personal use. This would be the amount that employees would have to pay to obtain comparable transpor- tation on their own in an arm's length relationship. Report taxable automobile and motor vehicle benefits in box 14 on the T4 and in the Other Infor- mation area, using code 34. The CRA's taxable benefits guide provides information on how to calculate automobile standby charge and operat- ing expense benefits, as well as benefits for vehicles that are not automobiles. It also defines the term "automobile" and lists types of vehicles that the CRA excludes from the definition. Housing, low/free rent, board and lodging: If employ- ers provide employees with ac- commodation (housing, board, lodging) for free or at a price that is less than the FMV, a taxable benefit arises, although there are exceptions for special and re- mote work sites. The value of the benefit is usu- ally its FMV less any rent the em- ployee paid. When calculating the taxable benefit, also include the amount the employer paid or reimbursed for utilities. The CRA allows employers to reduce the amount of the benefit if the accommodation is larger than the employee needs or if the employee does not have full pri- vacy because of the nature of the accommodation (for example, it contains equipment or storage facilities, or the public has access to it). Report the taxable benefit in box 14 on the T4 and in the Other Information area, using code 30. Free or subsidized board and lodging for employees who work at special or remote worksites will not be a taxable benefit if the special worksite or remote work location meets all of the CRA's eligibility criteria. The agency provides a list of qualifying requirements for both special worksites and re- mote work locations in its tax- able benefits guide and on its website. If all of the conditions for a special work site apply, the em- ployer and the employee must complete form TD4, Declara- tion of Exemption — Employ- ment at a Special Work Site, cer- tifying that the employee meets all of the eligibility criteria. The employer must keep the com- pleted TD4 on file. If an employee qualifies for a remote work location, the employer and the employee do not need to complete the TD4 form for the housing or board and lodging benefits to be tax exempt. A remote work location is generally one that is at least 80 kilometres from the closest es- tablished community that has a population of 1,000 or more inhabitants. To determine if a community is "established," the CRA looks at whether it has certain essential services (for example, grocer- ies, basic clothing store, accom- modation, medical services, schools) within it or within a reasonable commuting distance. The CRA also exempts up to $366 per month in 2019 for board and lodging provided to players on sports teams or mem- bers of recreational programs who meet specified eligibility criteria. Unreported payments: The CRA audit adjustment list indi- cates that some employers fail to report commissions, bonuses and cash payments made to em- ployees as taxable income. A cash payment, even if given as a gift or an award, is always taxable. This also includes near- cash gifts, such as gift cards and gift certificates. Employers must report tax- able income in box 14 on the T4. Cash-based gifts are also re- ported in the Other Information area, using code 40. Besides reporting taxable wages and benefits, payroll pro- fessionals must ensure that they calculate and deduct amounts for Canada Pension Plan contri- butions, employment insurance premiums, and income tax de- ductions from employees and pay the correct amount in employer contributions and premiums. The CRA's payroll website provides information on calcu- lating, remitting, and reporting payments such as bonuses, com- missions, cash payments, and taxable benefits. In addition, its business video gallery on its website has webi- nars on tax deductions for bo- nuses and for gifts and awards to employees. Payroll professionals who ad- minister payroll in Quebec must also make sure that they comply with Revenu Québec's rules for these payments and benefits. Revenu Québec's website pro- vides access to its taxable ben- efits guide (IN-253-V) and to a general guide on source deduc- tions and contributions for em- ployers (TP-1015.G-V). The CPA regularly runs semi- nars on taxable benefits for pay- roll professionals. Trouble spots include stock options, housing from TACKLING on page 1 News Some employers fail to report commissions, cash payments and bonuses as taxable income.

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