Chapter 3: General Employment Income and Deductions Flashcards
What types of income are considered part of employment income for income tax purposes in Canada?
Employment income includes:
Wages or salary
Tips or commissions
Benefits such as medical prescription plans, hospital plans, dental plans, stock option benefits
Employer contributions to pension plans
Employer-provided automobile
Use of employer-provided tools
Travel expenses and union dues
What is the source concept in relation to employment income?
The source concept applies on a net basis, meaning for each specific employment you must determine:
Which amounts are included as income for that employment
Which expenses can be deducted from income for that specific employment.
How does the source concept affect the deduction of employment expenses?
You are not allowed to deduct employment expenses from one source of employment income against a different source of employment income.
What additional employment-related expenses can employees who earn commissions deduct compared to those who do not?
Employees who earn commissions can deduct a broader range of expenses than employees who do not earn commissions.
How are employment income and employment expenses reported on the T1 income tax return?
Employment income amounts are reported on lines such as:
10100, 10120, and 10400 for income
20700, 21200, and 22900 for employment expenses
How does the ITA treatment of employment income differ from the T1 income tax return?
The ITA determines employment income as one net amount after including all taxable income and subtracting all deductible expenses.
On the T1 return, income and expenses are reported on various separate lines.
What sections of the ITA define employment income and its related deductions?
Section 5: Describes types of standard receipts considered employment income.
Section 6: Expands the list of what is required to be included in employment income by specifying other receipts and benefits.
Section 7: Defines rules for employer-provided stock option plans.
Section 8: Lists specific deductions available to reduce employment income for the year.
What is defined as employment income under ITA 5(1)?
Employment income includes salary, wages, and other remuneration, including gratuities, received by the taxpayer from employment.
