Module B - Employment income Overview

Question 1

What is employment income?

Answer 1

Employment income is comprised of income received from an employment contract by providing services to another party (your employer):

+ Only individuals can get employment income

+ All sources of income is a net concept so its on a net basis

Question 2

What key concept relates to employment income?

Answer 2

Key concept #4 / 6

Question 3

What is the first thing we have to know when calculating net employment income?

Answer 3

This person is an employee

Question 4

What are the four fundamental principals that will help us in calculating net employment income?

Answer 4

1) Employment income is taxable when received.

We use cash basis accounting

2) Any income or benefit paid/enjoyed is taxable, unless an exception applies

Anything we receive from our employer is taxable by default unless an exception applies (benefits or allowances that CRA carves out as being non-taxable)

3) Any expense paid/incurred is disallowed unless specifically allowed within the ITA

Any expensed paid or incurred to help earn employment income is disallowed by default unless in the CRA it allows it.

4) Income Taxes withheld, CPP and EI contributions are tax credits which are later taken

Question 5

what are two concepts that tie heavily with the Fundamental Principles of Employment Income and which principals specifically?

Answer 5

Key concept #3: There is a constant tension between tax payers and the government (tax everything and tax nothing unless we state an exception)

Question 6

What concept can I tie back to the common taxable benefits and define it please?

Answer 6

Key Concept #1: While tax laws in Canada may appear arbitrary their development is guided by economic policy and political or social goals.