If you are an employee, you can receive an employment benefit or allowance in cash (such as a meal allowance) or in a manner other than cash (such as a parking space or a gift).
Depending on the type of benefit or allowance and the reason it is given, you may, or may not, have to include the value in your employment income which may save you considerable tax.
Most employers and employees do not take the time to work out the best compensation, tax and business planning possible. It is therefore crucial for you to plan and have a good idea about what factors should be taken into account due to potential problems and pitfalls.
And if you are a business owner, every year you must determine what level of compensation should be taken out of your company and in what form. This is a major issue business owners face all the time.
The best way to ensure your success is to seek professional advice.
TAX TIP Higher-income spouses should pay home expenses. If the higher-income spouse pays the household expenses, it can free-up any income of the lower-income spouse to be invested. This will allow the lower-income spouse to pay tax on the investment income at a lower tax rate. Please contact us now for valuable tax minimization strategies for your family.
The following are some low or non-taxable employee benefits you should consider in your compensation planning:
- Cellular telephone provided to an employee primarily to assist the employee in employment is non-taxable; however, the personal-use portion should be included in his/her income
- Internet service provided at an employee’s home is not taxable as long as the employer is the primary beneficiary of the service
- Up to two (2) non-cash gifts and awards per year given to an employee are not taxable to him/her if the total value is less than $500. However, any amount over $500 annually will be taxable.
- Training costs, when they are mainly for the employer’s benefit, are not taxable
- Payments under a Private Health Services Plan are not taxable
- If an employer pays professional membership dues on behalf of an employee, there is no taxable benefit to the employee if the employer is the primary beneficiary of the payment
- The reimbursement of a spouse’s traveling expenses is not taxable if she went at the employer’s request and was mostly engaged in business activities during the trip
CAUTION! – Owner-managers must receive the above benefits in their capacity as employees, not shareholders or they will face punitive penalties from Canada Revenue Agency.
TAX TIP If you want to deduct employment expenses, you must have a Form T2200 – Declaration of Conditions of Employment – completed and signed by your employer. If you do not have this form, you can’t claim the expenses. The form outlines exactly which expenses are related to your job, including if you have been reimbursed for any of the costs. If you need assistance determining whether you can deduct employment expenses, please contact us now.
June 15, 2017 Self-Employed Tax Deadline
Be sure to file your 2016 Self-Employed Individual Income Tax Return now to avoid costly penalties.
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HALPERN Chartered Professional Accounting Firm is a full-service Tax, Accounting, Business Advisory and Financial Planning CPA firm. Accurate and timely information is only one piece of any effective solution. We are dedicated to bringing you all of the pieces together – knowledgeable and innovative advice, leading-edge technology, and a strong relationship with our clients. This type of creative thinking enables us to help you and your business organization to solve complex problems and significantly enhance your ability to improve performance, manage risk and build value.
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