12/17/2010

Important Note:

2010 T4A, Statement of Pension, Retirement, Annuity and Other Income

The Canada Revenue Agency (CRA) has recently identified a risk that under certain circumstances, the paper version of the original 2010 T4A form as well as the downloadable electronic version of the form could reveal the recipient’s Social Insurance Number box when it is placed in a standard T4 window envelope.

To mitigate this risk, the CRA changed the paper T4A form and the electronic version of the T4A form on its Web site. The revised form renamed “T4A (12/2010)” has been changed to move Box 012 - Social Insurance Number, Box 013 - Recipient’s Account Number and Box 61 Payer’s Account Number up by half a centimetre.

T4A forms are being reprinted and will be re-issued by the end of December 2010 to everyone who has ordered and received the previous version.

Please note that some software may have been developed to conform to the previous 2010 T4A form and may not print information within the repositioned boxes on the revised form. Caution should be taken to ensure that confidential information is not visible through a window envelope.

If you have already completed and distributed forms using the previous 2010 T4A form, do not re-issue them on the new form. However, please ensure than any further T4A forms (original, amended, added, cancelled or replaced) are completed on the revised version of the form.

The CRA regrets any inconvenience this late change may cause to T4A information return filers.

12/08/2010

Clarification on holiday raffles

The September/October issue of Dialogue contained an article on holiday events, gifts and bonuses. Please note that contest prizes/raffles fall outside of the CRA and MRQ gifts and awards policies and are therefore not eligible for the $500 exemption.

• If the employer holds a contest or raffle, employees who win the item are not entitled to the $500 gifts and awards exemption.
• If the social committee is funded by the employer and holds a contest or raffle, employees who win the item are not entitled to the $500 gifts and awards exemption.
• If the social committee is funded by the employer and provides a non-cash gift, not a prize, the employee may be eligible for the $500 exemption. An example might be where every employee receives a gift on their chair at their organization’s holiday event.
• If the social committee is not funded by the employer and the employer did not donate the item, neither a gift or prize is considered taxable.

For more information on the CRA’s gifts and awards policy, please see the following link: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/gfts/plcy-eng.html.

For more information on the MRQ’s policy regarding gifts and awards, please see the following link: http://www.revenu.gouv.qc.ca/en/sepf/bulletin/bi.aspx?nom=i-3_37_1_5-1.

12/02/2010

The 2011 TD1 forms are now available at CRA’s website at the following locations.

TD1 forms (2011)

http://www.cra-arc.gc.ca/formspubs/frms/td1-eng.html

The MRQ has a form that is equivalent to the TD1 called the TP-1015.3-V (2011-01) Source Deductions Return, which is used to establish the Quebec provincial tax exemption amounts. This form can be obtained from the MRQ’s website

TP-1015.3-V (2011-01)   Source Deductions Return

http://www.revenu.gouv.qc.ca/en/sepf/formulaires/tp/tp-1015_3.aspx

11/09/2010

Do you have Quebec employees that do not report to a Permanent Business Establishment in Quebec?

Beginning in 2011, if you have employees who perform work for you in the province of Quebec including those that do not report to a permanent business establishment, you will have to start making your CSST remittances to the MRQ. You will have to obtain an MRQ account number even though you do not remit statutory withholdings to the MRQ.

You will use a new separate remittance form (TPZ-1015.R.14.5-V) which will only include a single field for the CSST remittance. This form has been created in order to accommodate employers who do not have a permanent establishment in the province of Quebec, as well as employers who are using a service provider and who wish to remit their own CSST remittances to the MRQ separately.  

It is suggested that such employers contact the MRQ in order to obtain a Business Number to make CSST remittances to the MRQ prior to running their first payroll in 2011.

For more information on CSST changes and other important upcoming changes we recommend you attend one of the CPA’s upcoming 2010 Year-end and New Year Requirements seminars being held at various locations across Canada later in the year.  Please refer to the Calendar of Events that is posted at the CPA’s website for additional details. http://www.payroll.ca/source/Events/Calendar.cfm?Section=Calendar_of_Events

10/14/2010

The CRA T4A slip redesign

The Canada Revenue Agency is redesigning the T4A slip to simplify reporting requirements, to reduce the burden for the filer, and to increase data quality. The slip will be converted from the existing fixed field format design to a generic style similar to the T4 slip. The 2010 version of the T4A slip will reflect the redesigned look and will accommodate T4A reporting requirements for all tax years. For more information, visit the CRA’s website.

More information in relation to this and other important upcoming changes will be addressed in greater detail in our upcoming 2010 Year-end and New Year Requirements seminars to be held at various locations across Canada later in the year.

Please refer to the Calendar of Events that is posted at the CPA’s website for additional details. http://www.payroll.ca/source/Events/Calendar.cfm?Section=Calendar_of_Events

09/16/2010

Important changes to T4 for 2010 reporting year

The CRA has made some important changes to the T4 that will impact most employers. The most significant change is that the reporting of retiring allowances will be moved from the T4A to the “Other information” area of the T4.

In order to accommodate these changes; the following new codes have been added for use in the “Other information” area of the T4 which will be in effect for all slips processed on or after January 1, 2011 for payments in the 2010 calendar year and beyond.

Code 66 – Eligible retiring allowances
Code 67 – Non-eligible retiring allowances
Code 68 – Status Indian (exempt income) eligible retiring allowances
Code 69 – Status Indian (exempt income) non-eligible retiring allowances

Please note:  The amounts reported from Code 66 to Code 69 (inclusive) must not be included in Boxes 14, 24, 26 or 55 of the T4. Even though retiring allowances are now reported on the T4 slip, these payments are still not considered pensionable for C/QPP or insurable for EI and QPIP. Any income taxes associated with these codes will also be included Box 22 of the T4.
Code 86 – Security options election
In addition to the above codes, the CRA has also added code 86 to the “Other information” area of the T4. This code will to be used by employers to report security options cash-outs where the employer has opted out of claiming the security option deduction as an expense.  

If the employer elects this option, the taxable benefit will be reported as follows:

The full amount of the security benefit will be reported in Box 14, Code 38 and Code 86 of the T4. The 50% deduction (if applicable) will also be reported in Code 39 or 41 of the T4.

More information in relation to this and other important upcoming changes will be addressed in greater detail in our upcoming 2010 Year-end and New Year Requirements seminars to be held at various locations across Canada later in the year.

Please refer to the Calendar of Events that is posted at the CPA’s website for additional details. http://www.payroll.ca/source/Events/Calendar.cfm?Section=Calendar_of_Events

09/02/2010

When an employee repays an employer, in the same or a later year, for salary or wages paid when the employee did not perform his or her duties, (e.g. in receipt of wage loss replacement benefits) the repayment is considered to be a repayment of salary and wages and may be claimed as a deduction on the employee's income tax and benefit return.

With reference to CRA, employers should provide the employee with a letter confirming the date and the amount repaid. Revenue Quebec requests that employers enter a footnote in the center of the RL-1 slip "Reimbursement of Salary" followed by the amount.

Employers cannot adjust the employee's T4/RL-1 slip in order to reduce the total employment income, the C/QPP pensionable, or EI and QPIP insurable earnings. Nor can they adjust their pay records to reflect the amount of repayment. The employer portions for C/QPP EI and QPIP are not refundable.

08/26/2010

Employers can access several links to Federal and Provincial Government websites on our website in the "Government Links" section.

For example, employers would be able to access the website for Ontario Employment Standards from this area.

08/23/2010

If you are making a lump sum payment for a retroactive pay increase that goes back for 1 year or more, the bonus taxing method should be used to determine the amount of tax to be withheld. The retro method should only be used if you are making retroactive payments for periods of less than 1 year. Details on how to apply both methods can be found in the T4001 Employers Guide to Basic Information which can be obtained from CRA’s website.

08/09/2010

When calculating the eligible portion of a retiring allowance, employers may also have to include years of service with a previous employer in either of the following scenarios:

• the business was acquired or continued by the employer (merger or acquisition); or
• the employer’s pension plan recognizes any part of the years of service with a former employer (common with public pension plans).

08/03/2010

If you are a multi-jurisdictional organization it is important to always be aware that legislative items that pertain to matters such as vacation pay, overtime and statutory holidays differ from one province or territory to another. It is therefore important to be well informed as to the different requirements in each area you are located in.

07/14/2010

Service Canada has recently published a new detailed guide entitled “How to Complete the Record of Employment Form”.

Employers may download a copy at the following location at Service Canada’s website.

07/08/2010

Employer contributions to an employee's RRSP are considered to be a taxable benefit to the employee.

RRSP taxable benefits are pensionable and insurable and subject to CPP contributions and EI and QPIP premiums.

Employer contributions to an employee's RRSP are considered non-cash benefits and are not insurable provided that

• the employee cannot withdraw the amounts from a Group RRSP until they retire or cease to be employed; or
• the employee can withdraw the RRSP funds under a Home Buyers Plan or a Lifelong Learning Plan only.

Although the benefit is taxable and has to be reported on the T4/RL-1 slip, employers do not have to deduct income tax at source on the contributions they make to employees' RRSP’s.

The employer however must have reasonable grounds to believe that the employee can deduct the contribution for the year.

06/30/2010

Taxable benefits that are related to the purchase of shares or stocks at a discount or the employee’s receipt of shares free of charge must be reported in Box 14 and Code 38 of the T4 and Boxes A and L or the RL-1 only.

Do not report a deduction in Code 39 or 41 of the T4 or a footnote on the RL-1 for this type of stock related benefit.

The deduction codes on the T4 that apply to stock options as well as the applicable footnotes on the RL-1 should only be used to report stock options that are based on an agreement between the employer and employee that allows the employee to purchase shares at a fixed price per share. The price of these shares cannot be lower than the fair market value of the shares on the date the agreement was made. If your stock related benefit is based on this criteria, you may be eligible to report a deduction using codes 39 or 41 on the T4 as well as the applicable footnote on the RL-1.

06/24/2010

If you are terminating an employee and are paying out a retiring allowance, you must report the entire amount of the retiring allowance on the Record of Employment (ROE) in Box 17C, whether the retiring allowance is paid in installments or not.  

06/16/2010

The maximum CPP/QPP pensionable as well as EI and QPIP insurable earnings apply to each job the employee holds with different employers (different business numbers).

If an employee leaves one employer during the year to start work with another employer, the
new employer also has to deduct CPP/QPP contributions as well as EI and QPIP premiums without taking into account what was paid by the previous employer. This is the case even if the employee has paid the maximum contribution and premium amounts during the previous employment. Any overpayments will be refunded to employees when they file their income tax and benefit returns.

Employers are not entitled to a refund.

06/08/2010

Employers often make various payments to existing employees that fall outside of the regular pay period processing cycle. These payments could consist of bonuses, irregular commissions, banked overtime, etc. Additional payments such as these should be taxed using the bonus taxation method. 

The bonus taxation method is illustrated in Chapter 7 of the T4001  Employers' Guide - Payroll Deductions and Remittances. Employers may easily obtain a copy from CRA’s website at T4001.

05/28/2010

Employers who hire non-resident workers to work in Canada must ensure that these individuals have a SIN number that starts with a 9 as well as a valid work permit. Service Canada includes expiry dates for SIN numbers that start with a 9.

Employers should make note of the expiry date shown on the SIN card, in order to insure that the employee does not work beyond that date, without supplying the employer with a card showing a new date; or a new card that does not start with a 9 which would indicate that the individual has become a resident or a Canadian citizen.

05/21/2010

Short and long term disability payments paid by the employer through payroll directly to the employee are subject to all statutory deductions (tax, C/QPP,  EI and QPIP)  The income associated with the payments must have EI hours attached to them equal to whatever the employee’s deemed hours normally would have been had they been working.

05/12/2010

Employer-paid RRSP contributions must be reported in box 14 and Code 40 of the T4 as well as boxes A and L of the RL-1. 

The employee contributions are not reported anywhere on the T4 or the RL-1. The financial institution that administers the RRSP plan on behalf of the employer will issue receipts at year-end that will include both contributions.

04/29/2010

If an employer chooses to pay the premiums to a third party for STD and LTD on behalf of the employee, the benefits that the employee receives from the third party will be subject to income tax.

If the employee pays for the STD and LTD premiums through payroll deduction, then the employee will receive the benefits from the third party tax-free.

If an employer funds his or her own STD or LTD program, then the benefits that are paid to the employee will be subject to tax, C/QPP, EI and QPIP (in Quebec).

04/15/2010

Ontario is the only jurisdiction in Canada that requires employers to maintain an employee’s benefits for the notice period as required by law in the event of an employer initiated termination.

The legislation that addresses the issue of the employer’s requirement to maintain an employee’s benefits during the legislated notice period is addressed in the Ontario Employment Standards Act, 2000 and can be located in the following section of the legislation:

Pay instead of notice

61.(1) An employer may terminate the employment of an employee without notice or with less notice than is required under section 57 or 58 if the employer,

1. pays to the employee termination pay in a lump sum equal to the amount the employee would have been entitled to receive under section 60 had notice been given in accordance with that section; and
2. continues to make whatever benefit plan contributions would be required to be made in order to maintain the benefits to which the employee would have been entitled had he or she continued to be employed during the period of notice that he or she would otherwise have been entitled to receive.

More information may be obtained in the Ontario Employment Standards Act, 2000

04/08/2010

If an employer reimburses an employee directly for automobile costs such as gas, repairs and ,insurance that are associated with the employee’s own automobile, these reimbursements will be considered to be like a taxable auto allowance, and they will be subject to all statutory deductions, federal and provincial,income tax ,C/QPP, EI and QPIP (if employed in Quebec)

If the employer makes the same payments on behalf of the employee to the applicable organization, then the payments will be subject to federal and provincial income tax and C/QPP only as the amounts will not be deemed as cash income to the employee.

In both instances these amounts should be reported in Box 14 and Code 40 of the T4 as well as Box A and L of the RL-1 (QPIP if employed in Quebec)

03/26/2010

Whether or not a retiring allowance is eligible or not depends on the years of service.

The eligible calculation is $2,000 per year or part-year of service prior to 1996.

There might be an additional $1,500 per year prior to 1989 if:

• the company did not have a registered pension plan (RPP) or deferred profit sharing plan (DPSP);
• the employee was not a member of an RPP or DPSP; or
• the employee was a member but is not 100% vested in the plan as at the date of termination (the $1,500 would be pro-rated for the unvested portion)

03/17/2010

When an employer agrees to transfer any amount that is deemed to be employment income on an employee’s behalf into an RRSP they must always ensure that the appropriate deductions for C/QPP, EI and QPIP (QPP and QPIP in Quebec only) are taken into consideration prior to forwarding the funds to the financial institution.

03/01/2010

Pensioners’ taxable benefits, which are reported in Box 28 of the T4A, are subject to Ontario Employer Health Tax because they fall under Section 6 of the Income Tax Act. Employer Health Tax is calculated on all payments or benefits paid to or on behalf of an individual that fall under Sections 5, 6 and 7 of the Income Tax Act. Section 5 of the Act makes reference to payments made to individuals such as employment income. Section 6 of the Act refers to Taxable benefits and Section 7 refers to benefits that relate to stock options.

02/19/2010

If your pension plan is a defined contribution plan the PA amount reported in box 52 of the T4 will be comprised of the sum total both the employee and employer portions. The employee deduction amounts will always be reported in box 20 of the T4 and box D of the RL-1. There are no PA reporting requirements for Revenue Quebec.

More specific information on Pension Adjustments can be found in the T4084 Pension Adjustment Guide available at:
http://www.cra-arc.gc.ca/E/pub/tg/t4084/ 

02/12/2010

In order to ensure that correct amounts are reported on the RL-1 in Box I, QPIP insurable earnings; employers are required to report the exact QPIP insurable earnings amounts and not leave the field blank in the same manner as they do with C/QPP and EI. 

This is required even though the deduction and insurable earnings match. Unlike other statutory deductions such as QPP and EI, it is possible for QPIP insurable earnings amounts to be reported in boxes other than A.

For example, pay in lieu of notice is reported in Box O in the province of Quebec as a retiring allowance using Code RJ and is subject to QPIP due to the fact that wages in lieu of notice is subject to EI.

02/04/2010

Employers often make various payments to existing employees that fall outside of the regular pay period processing cycle. These payments could consist of bonuses, irregular commissions, banked overtime, etc. Additional payments such as these should be taxed using the bonus taxation method.

The bonus taxation method is illustrated in Chapter 6 of the T4001 Employers' Guide - Payroll Deductions and Remittances. Employers may easily obtain a copy from CRA’s website at T4001.

01/28/2010

If you employ individuals in the province of Quebec you must ensure that you aware of the taxable benefit treatment for benefits in that province. Certain items which include gifts and awards, medical and dental premiums, professional dues and moving expenses or allowances are taxed and reported differently by MRQ in comparison to CRA.

01/18/2010

The CRA has posted the limits for Money Purchase Pension Plans, Defined Benefit Pension Plans, DPSP’s, RRSP’s, and the YMPE at its website at the following location:

http://www.cra-arc.gc.ca/tx/rgstrd/papspapar-fefespfer/lmts-eng.html

The applicable rates currently in effect for 2009 and 2010 consist of the following:

01/08/2010

If an employer provides an employee with a car allowance as well as reasonable mileage expense reimbursements both are to be treated as taxable and subject to income tax, C/QPP, EI and QPIP. The total of both amounts must be reported in Box 14 and Code 40 of the T4 as well as Box A and L of the RL-1 (Quebec only).

Reasonable rates in effect for 2010 to remain unchanged from 2009

If the employer reimburses an employee for business kilometers only, then the amount of the reimbursement is deemed non-taxable provided it is deemed reasonable by CRA. The limit on the deduction of tax-exempt allowances paid by employers to employees using their personal vehicle for business purposes for 2010 will remain at 52 cents per kilometre for the first 5,000 kilometres driven and 46 cents for each additional kilometre.

For the Yukon Territory, Northwest Territories and Nunavut, the tax-exempt allowance will remain at 56 cents for the first 5,000 kilometres driven and 50 cents for each additional kilometre.For the Yukon Territory, Northwest Territories and Nunavut, the tax-exempt allowance will remain at 56 cents for the first 5,000 kilometres driven and 50 cents for each additional kilometre.

The general prescribed rate used to determine the taxable benefit relating to the personal portion of automobile operating expenses paid by employers for 2010 for company-owned or leased vehicles will remain at 24 cents per kilometer.

More information on the reasonable rates may be obtained at the website for the Department of Finance Canada http://www.fin.gc.ca/n08/09-125-eng.asp