One of the most common compliance issues is improper assessment of taxable benefits and allowances, or excluding taxable benefits from employment income.
In fact, 7 out of 10 of the most commonly requested adjustments from CRA to an employer’s payroll are related to taxable benefits. These amounts must be included in an employee’s income. They also impact the calculation of statutory source deductions, workers’ compensation premiums and other provincial payroll taxes and levies, and may have GST/HST implications.
Employers are responsible for determining whether the benefits they offer are taxable to their employees, adding the value of those benefits to reportable income, and then withholding, remitting and reporting the required statutory deductions to CRA and Revenu Québec (RQ).
But most employers are surprised at the depth and breadth of items that are considered taxable employment benefits. For example, many may not know that most employee gifts must be accounted for, unless it’s an item under the $500 gifts and awards exemption. Other common examples of taxable benefits include:
- automobile benefits and allowances;
- parking and transit passes;
- employee loans and stock options;
- traveling expenses for a spouse or partner; and
- other fringe benefits.