Chapter 3

Question 1

Name three common types of allowances that employers provide to employees

Answer 1

• costs for cars
• meals
• uniforms
  -safety shoes
  -other work-related clothing

Question 2

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

Answer 2

non-taxable

Question 3

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 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: 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 5

non-taxable

Question 6

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 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 QPI premiums, federal and provincial income taxes and Northwest Territories ad Nunavut payroll taxes.

Question 8

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

Answer 8

1. the allowance is based solely on business kilometres driven in a calendar year
2. the amount provided is based on the following government-prescribed reasonable guidelines:
   - 0.68 per km for the first 5,000 business kilometres in the year
   - 0.62 for each business kilometre after that
3. the employer does not reimburse the employee for expenses related to the same use of the vehicle

Question 9

Player Flooring, located in Pointe-Claire, Québec, has a weekly pay period. France
Lavergne works in the shipping/receiving department, earns $18.50 per hour and works 40 regular hours per week. France works overtime every week; in this pay period, 4 hours of daily overtime were worked Monday through Thursday. The organization pays employees
1½ times their regular hourly rate for overtime hours worked and provided a $20.00 meal
allowance per day to employees who work overtime.
France has a claim code of 3 on the federal TD1 and a deduction code of C on the TP1015.3-V. Calculate France’s net pay.

Answer 9

regular wages: 18.50 x 40 = 740
overtime wages: 18.50 x 1.5 x 16 = 444
taxable meal allowance: 20 x 4 = 80
As France works overtime regularly, the meal allowance is considered taxable by the CRA and the RQ

Question 10

What is the primary payroll compliance requirement concerning benefits?

Answer 10

that if they are taxable, both the 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 11

What statutory deduction are calculated on a non-cash taxable benefit?

Answer 11

non-cash taxable benefits are subject to statutory deductions for CPP/QPP contributions, income tax and Northwest Territories/Nunavut payroll taxes

Question 12

Which provinces impose a tax on insurance premiums?

Answer 12

The province of 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 13

taxable or non-taxable: Chemical dependency coverage under an employee assistance plan

Answer 13

non-taxable

Question 14

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

Answer 14

non-taxable

Question 15

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

Answer 15

taxable

Question 16

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

Answer 16

non-taxable

Question 17

Indicate whether the following would be considered taxable or non-taxable, federally and in Québec. If the gift or award is considered taxable, give the taxable amount. Assume all costs include applicable taxes. - A $600 watch for a birthday gift

Answer 17

federally taxable - $100
Quebec taxable - $100

Question 18

Indicate whether the following would be considered taxable or non-taxable, federally and in Québec. If the gift or award is considered taxable, give the taxable amount. Assume all costs include applicable taxes. - A $200 gift card to the Baby Boutique on the birth of a child

Answer 18

federally non-taxable
Quebec non-taxable

Question 19

Indicate whether the following would be considered taxable or non-taxable, federally and in Québec. If the gift or award is considered taxable, give the taxable amount. Assume all costs include applicable taxes. - Three non-cash gifts for occasions worth $300, $150 and $100

Answer 19

federally taxable - $50
Quebec taxable - $50

Question 20

Indicate whether the following would be considered taxable or non-taxable, federally and in Québec. If the gift or award is considered taxable, give the taxable amount. Assume all costs include applicable taxes. - A $400 camera for a 5-year service award

Answer 20

federally non-taxable
Quebec non-taxable

Question 21

Indicate whether the following would be considered taxable or non-taxable, federally and in Québec. If the gift or award is considered taxable, give the taxable amount. Assume all costs include applicable taxes. - A $100 gift certificate from Jackson’s Jewellers as a performance reward

Answer 21

federally taxable - $100
Quebec taxable - $100

Question 22

Provide two situations where employer-provided parking would not be considered a taxable benefit to the employee.

Answer 22

There is no parking taxable benefit in the following situations:
* when free or subsidized parking is provided to a physically disabled employee
* when there is a distinct and regular requirement for an employee to have a parking space as part of their employment activities, for example, if the employee is required to make regular daily calls to their customers. In the event of an audit, the employer must be prepared to justify that the value of the parking space is not a taxable benefit
* when an employer pays for parking costs incurred by an employee who is travelling away from the normal place of business. These are reimbursements of business-related expenses and are non-taxable
* when a business operates from a shopping centre or industrial park, where parking is available to employees and non-employees; the fair market value of parking, in this case, would be nil
* when an employer provides scramble parking (for example, there are significantly fewer spaces than there are employees and the spaces are available on a first-come-first-served basis)

Question 23

Taxable or non-taxable: a Quebec employer provides Accidental Death and Dismemberment insurance for their employees

Answer 23

taxable

Question 24

taxable or non-taxable: An Alberta employer provides private health insurance coverage for their employees

Answer 24

non-taxable

Question 25

taxable or non-taxable: a British Columbia employer pays 50% of the cost of the employees group term life insurance coverage

Answer 25

taxable

Question 26

taxable or non-taxable: a nova scotia employer offers and Employee Assistance Plan that covers their employees for alcohol dependency counselling services

Answer 26

non-taxable

Question 27

taxable or non-taxable: Justin Lemaire is physically disabled; the company provides him with paid parking spot

Answer 27

non-taxable

Question 28

taxable or non-taxable: National Merchandisers, with 23 payroll professionals across Canada, pays for these employees to take the Institute’s CPM certification courses

Answer 28

non-taxable

Question 29

true or false: if an employer charges a loan interest rate that is higher than the government- prescribed rate, the employee has received a taxable benefit from employment

Answer 29

false. if an employer provides an employee with a loan and charges the employee the government- prescribed interest rate or higher, no taxable benefit is assessed.

Question 30

The CPP is a contributory plan which means that all costs are covered by:

Answer 30

• revenue earned on CPP investments
• employee and employer contributions
• contributions made by self-employed workers

Question 31

Which of the following is NOT subject to CPP contributions?
1. Raja receives a $250 bonus
2. George’s employment is terminated and he receives $2500 legislated wages in lieu of notice
3. Mary aged 64 is working part time
4. Geeta is 71 and receiving a monthly $500 CPP retirement pension

Answer 31

4. Geeta is 71 and receiving a monthly $500 CPP retirement pension

Question 32

An employee turned 70 on September 12, 2023. What is the employee’s maximum annual CPP contribution?

Answer 32

=2,815.83

Question 33

Rehan started working for Allied Appliances on Feb 12, 2023. He turned 18 on August 15, 2023. When should his employer start deducting EI premiums?

Answer 33

from the first day he started working

Question 34

John has $35.00 deducted from his pay for Employment Insurance premiums. His employer offers a short term disability plan and therefore has a reduced rate of 1.249. What would be the total amount that the employer would remit in Employment Insurance premiums?

Answer 34

= 78.72
35 x 1.249 + 35

Question 35

A record of Employment is issued when there is an interruption of earnings of:

Answer 35

7 consecutive calendar days

Question 36

Jean is paid $25.00 per hour, receives a car allowance of $75.00, and a non-cash taxable benefit of $25.00 every pay. During the current bi-weekly pay period Jean worked 80 hours and received a bonus of $700.00. What are Jean’s insurable earnings for this pay period?

Answer 36

= 2,775
25 x 80 + 75 +700

Question 37

What is the purpose of the Employment Insurance Act?

Answer 37

provide assistance to workers who lose their jobs, or must be off work under other qualifies circumstances

Question 38

An employee turns 18 on August 21, 2023. What is the maximum number of months of contributory earnings for CPP?

Answer 38

4 months

Question 39

If an employee worked 44 hours in a week plus 3 hours of overtime paid at 1.5 times the regular hourly rate, how many insurable hours would they have worked?

Answer 39

47

Question 40

Which types of payments are subject to CPP contributions?
1. taxable benefits
2. controlled tips
3. income from employment
4. all of the above

Answer 40

4. all of the above

Question 41

When calculating an employee’s CPP contribution for their net pay, contributory earnings are defined as

Answer 41

pensionable earnings minus the applicable exemption

Question 42

Which of the following types of earnings are subject to CPP contributions?
1. tips that are controlled by the employer
2. paid sick leave
3. vacation pay
4. all of the above

Answer 42

4. all of the above

Question 43

Retirement pension, disability benefits and survivor benefits are all considered benefits under which of the following?

Answer 43

the Canada Pension Plan

Question 44

Which of the following payments will subject to CPP contributions?
- a lump sum payment of accumulated sick leave credits owing to a deceased employee
- a lump sum death benefit payments to an employee’s surviving spouse
- a lump sum payment to an injured employee to cover living expenses while waiting for Workers’ Compensation benefits
- a lump sum severance payment paid with an employee’s final pay

Answer 44

a lump sum payment to an injured employee to cover living expenses while waiting for Workers’ Compensation benefits

Question 45

If an employee’s EI premiums are $21.89 for a pay period, calculate the employer’s portion at the unreduced rate

Answer 45

= 30.65
21.89 x 1.4

Question 46

An employee earns a fixed salary of $950.00 per week. They are expected to work 37.5 hours per week. During month-end they worked an extra 3 hours of paid overtime. How many insurable hours would be recorded?

Answer 46

40.5

Question 47

An employee filed a CPT30 election with their employer on July 3rd. Calculate the maximum CPP contribution for 2023.

Answer 47

2190.09
3754.45 / 12 x 7

Question 48

Calculate the employee portion of CPP contribution for Dan earning $3,600 per month

Answer 48

196.85
3600 - 291.66 x 5.95%

Question 49

Calculate the employee portion of the CPP contribution for Asif earning $1800 per semi-monthly pay period.

Answer 49

98.42
1800 - 145.83 x 5.95%