Employment Income - Allowances, Expenses and Benefits

Flashcards covering the definitions and taxability rules for employment allowances, expenses, and benefits as per the National Payroll Institute standards.

Allowances

Amounts paid to employees, in addition to their earnings, for the use of personal property for business purposes or to cover personal living expenses associated with employment.

Non-accountable Allowance

An allowance where the employee does not have to provide proof of business use, which is considered taxable income.

Reasonable Car Allowance

A car allowance considered non-taxable if it is based solely on business kilometres driven using government-prescribed rates (e.g., $0.72\,per\,km$ for the first $5,000\,km$) and the employer provides no other reimbursements for the same use.

Unreasonable Car Allowance

An allowance that is considered taxable because it is a flat amount not based on kilometres, uses rates higher or lower than government guidelines, or is a gas reimbursement.

Overtime Meal Allowance (CRA)

A non-taxable amount up to $23$ (including taxes) provided when an employee works $2$ or more hours of occasional, infrequent overtime.

Distinctive Uniform

Special clothing that must be worn on the job or designed for safety (like safety footwear); providing or reimbursing these with receipts is not a taxable benefit.

Cash Benefits

Taxable benefits received through payroll, such as a reimbursement for a fitness club membership, subject to all statutory withholdings.

Deemed Cash Benefits

Taxable benefits where the employee has access to cash not directly paid through payroll, such as a reimbursement through accounts payable.

Near-cash Benefits

Taxable items that can be used like cash, such as gift cards, or easily converted to cash, such as stocks or gold nuggets.

Non-cash Benefits

Taxable items provided as goods, services, or property (e.g., use of a company automobile or life insurance premiums), subject to all withholdings except EI and QPIP premiums.

Fair Market Value (FMV)

The cost of a taxable benefit including the price of goods or services plus all applicable sales taxes ($GST$, $HST$, $PST$, or $QST$).

Group Term Life Insurance Taxable Benefit

Employer-paid premiums for life insurance, calculated on a pay period basis and included in the employee's income.

Accidental Death and Dismemberment (AD&D) Premiums

Employer-paid premiums for group plans that are considered a non-cash taxable benefit, including applicable provincial insurance taxes.

Restricted Group RRSP

An employer-sponsored plan where active employees cannot withdraw employer contributions, resulting in a non-cash taxable benefit subject to C/QPP.

Unrestricted Group RRSP

A plan where active employees can withdraw employer contributions at any time, resulting in a deemed cash taxable benefit subject to C/QPP and EI/QPIP.

CRA Gifts and Awards Exemption

A single annual $500$ exemption that applies to the total value of all non-cash gifts and awards given for special occasions or non-performance-related accomplishments.

Long-service Award

A non-cash award given once every five years for at least five years of service, which is non-taxable if the value is $500$ or less.

Scramble Parking

A parking arrangement with significantly fewer spaces than employees, where spaces are available on a first-come, first-served basis, resulting in no taxable benefit.

Taxable Interest Benefit (Loans)

A benefit calculated when an employer provides a loan interest-free or at a rate lower than the government-prescribed rate, using the formula: $Outstanding\,Principal \times (Prescribed\,Rate - Charged\,Rate) \div Pay\,Frequency$.

Standby Charge

A taxable benefit representing the value of having an employer-provided automobile available for personal use, calculated differently for owned versus leased vehicles.

Operating Expense Benefit

The benefit assessed when an employer pays for operating costs (gas, maintenance) for an employee's personal driving, generally calculated as personal kilometres driven multiplied by a prescribed rate (e.g., $0.34\,per\,km$).

Availability (Automobile)

The number of thirty-day periods an automobile is accessible to an employee, calculated as the calendar days divided by $30$ and rounded.