canada revenue agency americas’ sap users group (asug) conference montreal, october 2010

Canada Revenue AgencyCanada Revenue AgencyAmericas’ SAP Users Group (ASUG) Conference

Montreal, October 2010

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PresentersPresenters

Susan Sparling-McGinley

Dian Hardiman

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Today’s Topics - SusanToday’s Topics - Susan

Information Returns Program Update Changes to T4 Web Forms Pensionable and Insurable Earnings Review

Program Update T4A Redesign

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Information Returns Program Update Information Returns Program Update (General)(General)

Filing method Information slips filed in 2009

Information slips filed in 2010

Internet 10% (13.9 million) 65% (94.7 million)

DVD / CD 83% (121.5 million) 30% (43.4 million)

Paper 7% (10.4 million) 5% (8.1 million)

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Information Returns Program Update Information Returns Program Update (T4 and T4A Internet Filed)(T4 and T4A Internet Filed)

Tax Year 2009 2010 Increase T4 slips 6.7 million 13.1 million 96%

T4A slips 1.2 million 6.4 million 426%

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T4 Web FormsT4 Web Forms

Online, interactive session

No software required

File 1 to 6 original, amended or cancelled T4 slips and summary

T4 Web forms: Validates data in real-time Calculates totals for T4

summary

Print T4s for employees

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Pensionable and Insurable Earnings Pensionable and Insurable Earnings Review (PIER)Review (PIER)

2010 Program Results 119,848 PIER cases were generated containing

456,802 slips. 21,362 cases were intercepted through the

merge process containing 199,470 slips. 3,539 cases with 91,129 slips were removed

from the deficient listings without employer contact as a result of the PIER merge macro.

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Pensionable and Insurable Earnings Pensionable and Insurable Earnings Review (PIER)Review (PIER)Development Update PIER on My Business Account

• For January 2012 we are planning to allow employers with up to ten slips on their PIER report to view and respond to their PIER report online

Pensionable and Insurable Earnings• Beginning January 2012 employers should complete

the pensionable earnings (box 26) and insurable earnings (box 24) on the T4 slip at all times.

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T4A RedesignT4A Redesign

The 2010 version of the T4A slip is now available on the CRA Publications page.

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T4A RedesignT4A Redesign (Continued)

When to use the new slip You can now use the new slip to report T4A information. You may still use the 2009 version of the slip until the end

of 2010, however, it is only available electronically.

Retiring allowance amounts Moving the reporting from the T4A slip to the T4 slip

Electronic filing XML amount tags currently in use will continue to be valid

during 2011

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T4A RedesignT4A Redesign (Continued)

Amendments You can use the current or the new version of the T4A slip to

complete an Amendment As of January 2011, the new slip and codes should be used

New T4A codes for 2011 Our data capture systems will be modified and fully

operational January 2011 You can use the current or the new version of the T4A slip For 2011 and going forward, use the 2011 codes

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QuestionsQuestions

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Today’s Topics – Dian Today’s Topics – Dian

Transit Passes Non-Cash Gifts and Awards Policy Overtime Meals or Allowances Municipality or Metropolitan Area Education Benefits – Family Members

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Transit PassesTransit Passes

Policy: (effective January 1, 2010)

No taxable benefit when:

Transit passes are provided to employees (or retired employees) working directly in transit operations for their personal and exclusive use.

Taxable benefit when:

Free or discounted passes are provided to:

• Employees’ family members.• Municipal employees (and retired employees) not working

directly for transit operations.

• Pass is other than ferry passenger (walk-on) fares.

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Transit PassesTransit Passes

Example:

Loretta works as a secretary in the mayor’s office in Victoria.

Her employer provides her with a free vehicle transit pass for the local ferry.

Is it a taxable benefit?

Which is correct?

a) No. This pass is for her personal use and not for a family member.

b) Yes. She does not work for the transit authority.

c) Yes. It is a vehicle pass.

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Correct answersCorrect answers

There are two correct answers b) and c). The pass would be a taxable benefit for Loretta

because she does not work directly for the transit company.

If Loretta worked directly for the ferry company, the vehicle pass would still be a taxable benefit to her because it is not a passenger or walk on pass.

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Non-Cash Gifts and AwardsNon-Cash Gifts and Awards

Policy: (effective January 1, 2010)

An employer can give tax free:

1. An unlimited number of non-cash gifts and awards per year.

• total Fair Market Value (FMV) of $500 or less.

2. One anniversary/long service award once every 5 years.

• total FMV of $500 or less.

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Applies to both categories: There is a $500 exemption. Only the amount above $500 will be taxable. FMV will determine whether exemption has been

exceeded. Items that have a small or nominal value are not

included when calculating the gifts and awards benefit.

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What is not included in the policy: Cash or near cash gifts and awards (i.e., gift certificates)

Performance-related rewards (i.e., sales targets)

Employer-provided social/special events

Loyalty points

Reimbursements

Hospitality rewards

Disguised remuneration

Manufacturer provided gifts and awards

Gifts or awards provided by a social committee that is not controlled or funded by the employer

Gifts or awards given to non-arm’s length employees or related persons

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Example:1. Your employees receive an annual anniversary

award valued at $150. 2. Every five years, employees receive a long

service award, valued at $750.

What is the tax treatment of these awards?

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Correct answerCorrect answer

The annual awards in 1. are all taxable because an employee may only receive one anniversary award once every 5 years.

$500 in 2. is exempt under the Long Service Awards policy and the remaining $250 is a taxable benefit and should be e remaining $250 is included in the employee's income.

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QuestionsQuestions

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Did you know …Did you know …

The CRA has developed an interactive questionnaire to help employers determine how items they give their employees should be treated under our Gifts and Awards and Long Service/Anniversary Awards policies.

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Overtime Meals or AllowancesOvertime Meals or Allowances

Policy:

No taxable benefit if:

The employee works two or more hours of overtime before or after his shift; and

The overtime is infrequent or occasional in nature:

Generally less than three times a week.

We will allow more on occasional basis to meet workload demands.

The value of the meal or allowance is reasonable.

Up to $17.

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Update:

In the fall (2009), we changed our position in one example:

Example 2 - Meal allowance is not a taxable benefit

Phillip works in the shipping department of a mail order company. The last two weeks in each month, a predicted increase in orders causes him to work two nights of overtime at the end of his regularly scheduled hours. Phillip’s employer provides him with a meal allowance on those evenings.

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Which is correct?

a) No. The allowance is reasonable and the employee only works overtime once a week.

b) No. Because the allowance is paid under a collective agreement.

c) Yes. The employee receives cash and no requirement to purchase a meal.

Example: An employee works 3

hours of overtime once a week for 3 weeks.

Per his collective agreement, the employee is paid a $15 meal allowance.

The employee brings a meal from home.

Is the allowance taxable?

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The correct answer is a) No. The allowance is reasonable and the employee

only works overtime once a week. Since the conditions in the policy are met, the $45 does not have to be included in the employee’s income as a taxable benefit.

Nothing in the policy says the allowance has to be used to purchase a meal on that evening. That being said, there is sometimes a fine line between a non-taxable allowance and additional remuneration.

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Municipality or Metropolitan AreaMunicipality or Metropolitan Area

Policy:

A meal allowance for travel within the municipality or metropolitan area is not taxable if:

The allowance is reasonable; The purpose of the allowance is to ensure the efficient

performance of the employee’s duties, and It is not an alternate form of remuneration.

** This policy does not apply to motor vehicle allowances.

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Example 1: Your manager inspects and approves installed

security systems. He works from 8 a.m. until 4 p.m. each day. On Tuesday, he has a late afternoon inspection

and will receive a $15 meal allowance. Is the $15 a taxable benefit?

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The correct answer is YES. It does not appear that the meal allowance is

provided to allow the employee‘s duties of employment to be completed in a more efficient manner in the particular circumstances (which is an important condition in the policy).

It would appear the meal allowance is paid because the employee is not able to get home from work at his usual time.

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Example 2: Andy repairs hydro lines. Today he is working an

hour away from the office but within the city limits.

His employer will pay him a $25 meal allowance.

Is this a taxable benefit?

Which is correct?

a) No. Andy uses the money for lunch because it’s too far to go back to the office.

b) Yes. The $25 meal allowance is not reasonable.

c) Yes. He is not travelling outside the city limits to perform his duties.

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The correct answer is b) Yes. It is our opinion that $25 is not a reasonable meal allowance for purposes of this policy.

Income Tax Rulings indicated in 2009-0333541E5 that for the purpose of this administrative policy the CRA will generally consider up to $17 for the meal portion of any travel allowance as reasonable.

This dollar value is taken from the overtime meal / allowances policy.

Even though a) would be correct by itself, it is only one of the conditions that the employee has to meet. Because the employee has to meet ALL conditions and doesn’t, the other conditions no longer need to be considered. The allowance will be a taxable benefit to Andy.

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Education Benefits - Family MembersEducation Benefits - Family Members

Scholarships, bursaries, or tuition fees for employee family members are not taxable to the employee if for post-secondary education.

Employers report the FMV on a T4A slip for the family member.

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Education Benefits - Family MembersEducation Benefits - Family Members

Which is correct?

a) Report the payment on the employee’s T4 slip as a taxable benefit?

b) Report the payment as scholarship income on a T4A slip in the student’s name?

c) Not prepare a slip because the child can claim the scholarship exemption?

Example: Your company offers

educational assistance for your employee’s children.

This money helps the employee pay for private secondary school education for his child.

Do you…

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The correct answer is a) - Include the payments on the employee’s T4 slip as a taxable benefit.

If you provide scholarships, bursaries, or tuition to your employees’ family members who attend elementary or secondary schools, the FMV of these benefits are still a taxable benefit to the employee, and you have to include the amounts in the employee’s income.

The new administrative position only applies to post secondary education.

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QuestionsQuestions

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In 2008, employers reported $15.7 billion in taxable benefits on T4 slips.

• $ 480 M - Housing, board and lodging (code 30)• $ 438 M - Travel in Prescribed Zone (code 32)• $ 889 M - Personal Use Employers Auto (code 34)• $ 80 M - Interest free/low interest loans (code 36)• $ 5.9 B - Security/Stock options (code 38)• $ 7.9 B - “Other” (code 40)

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In 2012, CPP has to be deducted from employee’s wages up to age 65 even if the employee is receiving a CPP retirement pension.

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Benefit payments from a wage-loss replacement plan are no longer pensionable.

This change is based on a Federal Court of Appeal decision for the Toronto Transit Commission in January 2010.

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Simplified logbook for vehicle expensesSimplified logbook for vehicle expenses

On June 28, Minister Ashfield announced a new simplified logbook method that a business can use to keep track of business travel.

Not intended for calculating a taxable benefit for the personal use of an employer provided or employer leased motor vehicle (including automobiles).

It is for business persons who use a vehicle in a business and claim motor vehicle expenses relating to the business travel or commercial activity OR input tax credits on GST/HST.

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True or False?True or False?

Gift certificates and gift cards are ALWAYS taxable.

The correct answer is True.

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Visit Visit Our Our Website!Website!

www.cra.gc.ca

canada revenue agency americas’ sap users group (asug) conference montreal, october 2010

Documents

t4a information

t4a internet

t4a slips1

t4a redesignthe

t4a slipfor

program update t4

t4a redesign continuedwhen

usednew t4a codes