Chapter 3: Employment Income Flashcards
Employment Income
income from office or employment - a taxpayer’s income for a taxation year from an office or employment is the salary, wages.
What are the five factors that determine whether you are an employee or self-employed?
1) Control of Work
2) Ownership of tools and equipment.
3) Ability to subcontract or hire assistants.
4) Financial risk.
5) Opportunity for profit.
What are the three types of bonus arrangements?
1) Standard bonus
2) Other bonus
3) Salary deferral arrangement
Standard Bonus
Paid by the 179th day of the employer’s business year end.
What are the two tax consequences of a standard bonus?
1) Employer deducts when owed.
2) Employee includes when received.
Other Bonus
paid more than 179 days after the employer’s business year end, but prior to three years after December 31 of the year in which the bonus was earned.
What are the two tax consequences of other bonus?
1) Employer deducts when paid.
2) Employee includes when received.
Salary Deferral Arrangement
paid more than three years after December 31 of the year in which services were rendered.
What are the two tax consequences of salary deferral arrangement?
1) Employer deducts when owed.
2) employee includes when services are rendered.
Five-Step Analysis of Employee Benefit
1) Is there a benefit?
2) Had the benefit been received because of an individual’s employment?
3) Is the employee or someone related to the employee the primary beneficiary?
4) What is the value of the benefit?
5) Is the benefit excluded?
Motor Vehicle/Automobile Benefit
if your employer provides you with a vehicle, a taxable benefit is assessed on all personal use. Employer may buy or lease the vehicle.
What are the two calculations that the Motor Vehicle Benefit include?
1) Standby Charge: portion of the cost of the vehicle.
2) Operating Expense: cost of operating/maintaining the vehicle.
