Chapter 3

Question 1

name three common types of allowances that employers provide to employees

Answer 1

cars, meals, uniforms, safety shoes or other specific work-related clothing

Question 2

taxable or non-taxable: Leslie Lafarge receives $0.68 per kilometre for the first
5000 business kilometres driven using a personal vehicle
and $0.62 for each business kilometre after. No other
compensation is paid for the use of the car.

Answer 2

non- taxable

Question 3

taxable or non-taxable : Due to late shipments, the employees who work in the
shipping/receiving department are asked to work overtime
every night for the next 4 weeks. The company reimburses
the employees $15.00 each day for the cost of their
dinners.

Answer 3

non-taxable

Question 4

taxable or non-taxable: Frances Miles is given a credit card to buy gas for a personal car at Sunshine Fuels.

Answer 4

taxable

Question 5

taxable or non-taxable: Marcella Morin took three clients to lunch on Wednesday and submitted the receipt to accounts payable with an expense claim.

Answer 5

non-taxable

Question 6

taxable or non-taxable: The company pays for the safety boots that Jennifer Giles
must wear on the job.

Answer 6

non- taxable

Question 7

Which statutory deductions apply to taxable allowances?

Answer 7

taxable allowances are subject to withholding and reporting for CPP/QPP contributions, EI and Quebec Parental Insurance PLan premiums, federal and provincial income taxes and Northwest Territories and Nunavut payroll taxes

Question 8

what three conditions must be satisfied for a car allowance to be considered reasonable?

Answer 8

• the allowance is based solely on business kilometres driven in a calendar year
• the amount provided is based on government prescribed reasonable guidelines
• the employer does not reimburse the employee for expenses related to the same use of the vechile

Question 9

what is the primary payroll compliance requirement concerning benefits?

Answer 9

is that if they are taxable both federal and quebec governments require that the value of the non-cash benefit or cash reimbursement amount is included in the employee’s income as it is earned or enjoyed, meaning on a pay period basis

Question 10

what statutory dedutctions are calculated on a non-cash taxable benefit?

Answer 10

are suject to statutory deductions for CPP/QPP contributions income tax and northwest territories/nunavut payroll taxes

Question 11

which provinces impose a tax on insurance premiums?

Answer 11

Manitoba assesses a Retail Sales Tax of 7% and Ontario assesses a Retail Sales Tax of 8% on insurance premiums the province of Quebec assesses a 9% tax on insurance premiums

Question 12

taxable or non-taxable chemical dependency coverage under an employee assistance plan

Answer 12

non-taxable

Question 13

taxable or non-taxable provincial health care taxes paid by an employer for their Ontario employees

Answer 13

non-taxable

Question 14

taxable or non-taxable personal income tax preparation provided to senior management employees

Answer 14

taxable

Question 15

taxable or non-taxable job placement counselling for an employee whose employment is being terminated

Answer 15

non-taxable

Question 16

Fatima’s life insurance coverage through her Québec employer’s group plan is 2 times her annual salary of $32,000.00. Her employer pays the insurer 100% of the cost of her life insurance coverage at a premium rate of $2.00 per $1,000.00 of coverage per month, which does not include tax. Calculate Fatima’s monthly taxable benefit.

Answer 16

139.52
=32,000 x 2 (round up to nearest thousand) x 2/1000
= 128 x 9% = 11.52
= 128 + 11.52

Question 17

Square One Invitations has its head office in downtown Regina, Saskatchewan. The employees at this location have their $225 monthly parking fee, plus GST paid for by the company. Calculate the bi-weekly parking taxable benefit for the employees.

Answer 17

109.04
= 225 + 11.25 (GST) x 12
= 2835 / 26

Question 18

What information is required to calculate the standby charge, the reduced standby charge and the operating cost benefit for a company-owned automobile?

Answer 18

capital cost
sales tax
availability
total kilometres
business kilometres
personal kilometres

Question 19

with respect to an employer-leased automobile, a terminal charge is:

Answer 19

a lump-sum payment to adjust understated lease costs

Question 20

Susan used a company-owned automobile more than 50% for business in 2024. She has a standby charge of $4,500 that will be included in her taxable income. Susan notified her employer in writing to use optional method of calculating the operating cost benefit. What is Susan’s operating cost benefit?

Answer 20

2250
= 4500 / 2

Question 21

Mary Ann took clients to lunch and submitted the receipt to accounts payable with her expense claim. This is considered:

Answer 21

expense reimbursement

Question 22

Lori who is employed in Ontario, was provided with a company-leased automobile that was available to her for 25 says before she terminated her employment. The vehicle was leased for $320 per month plus 13% HST. Calculate Lori’s standby charge.

Answer 22

200.09
= 320 + 41.60
= 361.6 x 2 / 3 x 0.83

Question 23

Taxable cash allowances and taxable expense reimbursements paid to an employee in Quebec would be subject to which of the following statutory deductions?

Answer 23

• federal and Quebec income tax
• EI and QPIP premiums
• QPP contributions

Question 24

When an employee is provided with an employer-owned or employer-leased automobile for both business and personal use, the employee is assessed with:

Answer 24

non-cash taxable benefit

Question 25

Business driving refers to any driving by an employee for business purposes NOT including:

Answer 25

travel between home and work

Question 26

EI and QPIP premiums are calculated on:

Answer 26

cash taxable allowances

Question 27

Teresa drove a company car 15,000 personal kilometres in 2024. The total kilometres driven for the year were 25,000 kilometres. The actual operating costs for this automobile were $868.00, including taxes. What would Teresa’s portion of these operating costs be if she was going to reimburse the organization?

Answer 27

520.80
= 15,000 / 25,000
= 0.6 x 868

Question 28

Jasvir’s employer loaned her $1,000 for a computer purchase. They subsequently decided to forgive the loan principal. The forgiven amount is considered:

Answer 28

employment income and therefore fully taxable

Question 29

Karen has a company-leased automobile available to her for 135 days in the year. Calculate the availability period.

Answer 29

4

Question 30

Bill, who works in Ontario, is submitting a request for reimbursement for 1,000 km driven this pay period. Assuming he has already been reimbursed for 4,500 km this year and that his company reimburses him at the government reasonable rate, how much will Bill receive for his mileage allowance?

Answer 30

670
= 500 x 0.7 + 500 x 0.64

Question 31

Non-cash taxable benefits are subject to all statutory withholdings EXCEPT:

Answer 31

EI premiums and QPIP

Question 32

Which of the items listed is NOT correct?
- Parking for businesses operating from a shopping centre or industrial park is not taxable
- Where the employer owns the land on which the employee is parking, no taxable benefit exists
- Free or subsidized parking provided to a physically disabled employee is not taxable
- Where parking fees are taxable, the benefit is subject to Goods and Services Tax and Harmonized Sales Tax where applicable

Answer 32

• where the employer owns the land on which the employee is parking, no taxable benefit exists

Question 33

ABC company reimburses Mary, who works in their BC office, for business km driven in her car at a rate of $0.42 per km. This allowance is considered a :

Answer 33

fully taxable allowance subject to all statutory deductions

Question 34

Which of the following benefits are considered cash taxable benefits?
- tuition for work-related course
- board and lodging paid for with other remuneration
- group term life insurance premiums paid by the employer
- 2 gift baskets totalling less than $500

Answer 34

board and lodging paid for with other remuneration

Question 35

ABC company contributes to an employee’s group RRSP where the employees are not allowed to withdraw the funds until retirement. The employer contributions are considered:

Answer 35

non-cash taxable benefit and therefore not insurable earnings

Question 36

Plumbing company in Montreal pays the premiums for a private health insurance plan that covers employees dental and prescription costs. The premiums plus applicable taxes are considered:

Answer 36

a non-cash taxable benefit