Assignment questions Flashcards
Determine which item is an allowance, a taxable benefit or an expense reimbursement as well as if it is subject to CPP, EI or IT
- Company paid Group term life insurance
- Reasonable mileage reimbursement for business travel
- Car Allowance
- Company paid accidental death and dismemberment
- Mileage paid at .55/ km for business travel over 5000 km
- Taxable benefit, subject to income tax and CPP but not EI
- Expense reimbursement, not subject to any deductions, simply added to net pay
- Allowance, fully taxable, subject to CPP and EI
- taxable benfit, value of the premium is subject to Income tax and CPP but not EI
- amount over and above reasonable km amount set out by CRA is taxable to the employee
Sally has the use of a company vehicle, her vehicle log showed she drove 39,805 km over the course of the year (365days), 6,510 which were personal km and the vehicle was used for more than 50% business use. The capital cost of the vehicle is set at $29,995 (includes taxes). she is paid bi-weekly.
Calculate the taxable benefit that will be added to her income per pay. show all calculations
- Availability = 365 days / 30 days = 12.16 or 12 periods
- standby charge- because sally uses her vehicle for more than 50% business use and her monthly km usage is less than 1667 km per month (or 20,004 km per year) she can apply the reduced standby charge
6510/ (1667x12) x (2% x 29,995 x12) = 6510/(1667 x 12) x (2%x29995x 12) =6510/20004 x 7198.80 =.325 x 7198.8 =2339.61
- Operating cost Benefit = $0.27 x personal km
=0.27 x 6510
=1757.70 - automobile taxable benefit
- 61 + 1757.70 = $4,097.31 per year
4097.31 / 26 = 157.59 per pay period
sally will have $157.59 added as a taxable benefit each pay
Explain why a taxable benefit that is usually pensionable and insurable does not have CPP or EI deducted
when an employee has reached their yearly maximum pensionable earnings (YMPE) limit they no longer have to pay CPP contributions, the same goes for when they reach their maximum EI premium deductions. Therefore no CPP or EI will be deducted
What does uniforms and special clothing become a taxable benefit?
This becomes a taxable benefit when the employer or the law does not require a specific type of clothing but will pay an employee an allowance.
Paul yearly salary is $40,000 per year and is paid semi-monthly. he receives a taxable benefit for group term life insurance that is 2x his annual salary. The coverage is $1.50 per $1,000 of coverage. His employer pays 100% of the insurance coverage. what is the taxable amount per pay? please show all calculations.
$40,000 x 2
= 80,000 x 1.50 / 1,000
=120,000 / 1,000
=$120
per pay:
= 120 / 24
=5.00 per pay
True or false
group health insurance benefits are a taxable benefit
False
ABC company has the following people on staff. All staff is paid on a bi-weekly basis. they do not receive any additional benefits or pay. Calculate CPP contributions
name age salary job status YTD contr.
bob 32 $2,800 biweekly FT 2,400
BOB
$2,800
- 2 pay periods in month
CPP exemption: $134.61 per pay
Contributory earnings: 2,800 - 134.61
$2,665.39 per pay
CPP contribution employee: 2,665.39x 4.95% =$131.94 per pay
employer contribution: 131.94
Total remittance to CRA:
the maximum contribution is 2,424.40 and he already contributed 2,400 so he can only contribute 25.50 total to remit to CRA = 25.50 + 25.50 = 51.00
ABC company has the following people on staff. All staff is paid on a bi-weekly basis. they do not receive any additional benefits or pay. Calculate CPP contributions
alice age 17 $500 monthly pt 0.00 CPP contributions to date
Alice turns 18 on oct 15
she would not pay CPP as she is under 18
ABC company has the following people on staff. All staff is paid on a bi-weekly basis. they do not receive any additional benefits or pay. Calculate CPP contributions
John 71 $800 monthly pt contributions to date $355
he would not have any cpp deductions as he is 71
ABC company has the following people on staff. All staff is paid on a bi-weekly basis. they do not receive any additional benefits or pay. Calculate CPP contributions
Fred 40 $1,000 weekly ft contributions to date $2,375
gross pensionable earnings: 2,000
2 pay periods in a month
(Bi-weekly salary 1,000 x 52 = 52,000 / 26 = $2,000 per pay )
CPP exemption per pay period: 134.61
Contributory earnings: 2000 - 134.61 = 1865.39 per pay
cpp employee contribution: 1865.39 x 4.95% = 92.34 per pay
employer contribution: 92.35 per pay
Fred has already contributed 2375.00 so far so he can only contribute 50.50 more to reach his maximum
total to send to CRA 50.50 + 50.5 = 101.00
What is the purpose of both federal and provincial TD1?
They are used by the employee and employer to determine the amount of federal and provincial tax to deduct from an individual’s taxable employment income.
Why is TD1 important to payroll?
it is important to payroll as the signed document is legal and binding, it tells payroll the amount of personal exemptions and employee is entitled to, any additional tax they may request to have deducted. When signed it also tells CRA that the employee has made these requests and that they are liable for its accuracy.
When does an employee have to fill out a new TD1?
if an employee has more than basic exemption on their TD1 forms they must fill out a new one each year in case their tax situation changes.
Canada Revenue determines the frequency in which employers are required to remit their source deductions. List the frequencies.
- Regular
- Quarterly
- accelerated remitter (threshold 1 and 2)
How does cra determine which remittance frequency an employer is to use?
CRA uses the AMWA (Average monthly withoholding amount). This is based on the employer’s AMWA 2 years prior. for example an employer’s 2013 AMWA will determine what frequency they will use in 2015
