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 Assistant Editor Mallory Hendry 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 August 2016 | CPR payroll must include them in an employee's income for calculat- ing CPP contributions, EI premi- ums and income tax deductions. The tips must also be reported in box 14 on a T4 at year end. If an employer does not con- trol the tips, the CRA does not consider them employment income and payroll does not have to include them in an em- ployee's earnings for calculating source deductions. This can oc- cur when: • a customer leaves a tip on a table after a meal and the employee keeps the entire amount or a customer pays a tip directly to a porter, bellhop, car attendant, door person, etc. • a customer includes an amount for a tip when using a credit or debit card to pay a bill and the employer passes on the tip in cash to the employee • employees share tips in a way that they, rather than the em- ployer, determine. Even though employers are not required to deduct or pay their share of CPP or EI for direct tips, the CRA allows employees to pay CPP contributions on them on their own if they so choose. To do so, an employee must complete a form CPT 20, Elec- tion to Pay Canada Pension Plan Contributions and send it to the CRA with their personal income tax return. In addition, the CRA requires employees to declare direct tips when they file a personal income tax return. In the interest of good employee relations, employers may wish to advise employees of the CPP option and income tax requirement. If employees receive both controlled and direct tips, pay- roll must take source deductions from and report at year end only the portion of the tips that the employer controls. Quebec differences For employers and employees in Quebec, the CRA also requires that tips that an employee has to report to an employer under provincial law be included with controlled tips. As such, the tips are subject to EI premiums and federal income tax source de- ductions. Quebec's Taxation Act re- quires employees in the res- taurant and hotel sector who receive tips, whether directly or indirectly, to report them to their employer each pay period. To do so, employees must complete form TP-1019.4-V, Reg- ister and Statement of Tips (or an equivalent document) and give it to their employer at the end of every pay period. Tips they have to report include those that they directly receive from customers and those that they share in un- der a tip-sharing arrangement, as well as other unrelated tips (e.g., tips a cloakroom attendant or ho- tel valet receives). Employees do not have to report tips from take-out coun- ters or deliveries or tips result- ing from service charges added to customers' bills. From the amount they report on the form, they subtract any tips they gave to other employees under a tip- sharing arrangement. If the amount of tips that an employee reports in a pay period is less than eight per cent of the employee's sales upon which tips are expected (called "tippable sales"), the employer must allo- cate an amount to the employee as tips to make up for the differ- ence. Employers and employees can apply to Revenu Québec for a reduced allocation rate if they believe it is too high for their es- tablishment. Not all employees are subject to the tip-allocation require- ment. Revenu Québec exempts employees such as valets, door attendants, porters and car at- tendants, who do not make tip- pable sales in a pay period. Besides deducting EI and fed- eral income tax from the tips employees report, payroll has to include them for calculat- ing Quebec Pension Plan (QPP) contributions, Quebec Parental Insurance Plan (QPIP) premi- ums and provincial income tax deductions. They are also included for employer contributions to the province's health services fund, labour standards levy and train- ing and development fund, as well as for workers' compensa- tion premiums. Payroll must also include the tips that employers allocate in all source deduction and employer contribution calculations, ex- cept those for EI, QPIP and fed- eral income tax. Even though employees do not report tips that are part of a service charge added to custom- ers' bills and later distributed to them, the tips are still subject to source deductions. At year end, payroll must re- port employee tips on an RL-1. In boxes A and S, include all of the tips that an employee report- ed to the employer, as well as all of the tips that were part of a ser- vice charged added to custom- ers' bills and later distributed to the employee. Report allocated tips in boxes A and T. Employers in Quebec must also submit form TP-1086.R.1- V, Employer's Statement of Tips and Tippable Sales, when they file their Summary of Source De- ductions and Employer Contri- butions at year end. It provides Revenu Québec with a list of employees who had tippable sales, how much they had in sales, the amount of tips they reported, the amount their employer allocated and the amount that their employer con- trolled. To stay on top of all of the tip requirements, payroll profes- sionals should regularly review CRA and Revenu Québec re- quirements (if applicable), as well as any provincial labour standards rules that may apply. from TIPS on page 3 Payroll must include tips in calculating QPP The CRA requires employees to declare direct tips when they fi le a personal income tax return.

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