Ch. 6 Employment Income Flashcards
What does employment income include?
Salaries, wages, bonuses, taxable benefits and other payments, stock potion benefit, taxable allowances less allowable deductions
What are some common taxable benefits?
Allowances (unless an exception), board of director payments, gifts and rewards for non-cash gifts up to $500, recreational facilities or club dues (personal use), severance packages, life insurance, automobile standby and operating costs, non-group sickness or accident insurance plan, employer payment for public health care, employer payment for finanical counseling and incoem tax return prep, personal travel expenses - including expense of spousal travel, value of board or loding, holiday trips, incentive pizes or other awards, tuition fees, reimbursement for tools used for employemnt, airline transportation passess who are paying less than 50% of economy, discounts on merch less than cost, subsidized meals less than cost, moving allowances
What are some common deductions?
Sales person expenses, travel expenses (limited), motor vehicle expenses, capital cost allowances (CCA), workspace in-home, employee’s RPP, professional dues, reimbursements
What are the special calculations to calculate automobile employee benefits?
Employee benefits for employer automobiles - Standby and operating cost benefit.
How do you calculate the standby charge if the employer owns the vehicle?
2% x (C x D)
C = Original cost of the vehicle including GST
D= Days where the employer owned the vehicle / 30 (rounded to nearest whole number - round down for 0.5).
This gives us 2% x (Cost / months owned)
How is stand by charge calculated if the employer leases the vehicle?
2/3 x (E - F)
E = Lease payments for the year including sales tax
F = Portion of the lease payments for loss or damages and any liability arising from the use of it
This gives us 2/3 (Lease payments - repairs/maintenance)
What is a standby charge?
IT is the cost associated with having an automobile for personal use. The benefit arises because they do not need to use after-tax cash to purchase or lease it for personal use.
How can the standby charge be reduced?
Only if all of the following apply:
- required to use it for employment duties
- automobile is used 50% or more for employment
- personal use kilometers are less than 20,004 per year
What is the rate used to reduce the standby charge if owned/ leased by employer?
Personal use kilometers # / (1,667 x D)
D = days owned or leased / 30 (same rounding rules)
What is an operating cost benefit for employer-owned automobiles?
Employees benefit because the employer is paying for the operating costs for their own personal purpose.
How do yo calculate operating benefit if the automobile is being used less than 50% of the time for employment purposes?
personal kilometers x prescribed rate
Note: Prescribed rate is .28 per kilometer
How do you calculate operating benefits if the automobile is being used for more than 50% for employment purposes?
Lesser of:
Personal kilometers x presribed rate
1/2 of the standby charge
What is included in operating ocsts?
Fuel, insurance, registration, and maintenance. Does not include interest, CCA, lease costs, parking costs, or highway/bridge tolls
What is the operating cost if the employee owns or leases and the employer pays for the operating costs?
(Personal / total kilometers) x Actual operating costs paid by the employer
What if an employee pays the employer for use of the company car?
This is considered a reimbursement for standby (within the year) and operating costs (within 45 days of dec) and is deducted in determining net employment benefit included in employment income.