If an employee is paid a flat rate vehicle allowance, which is not based on kilometres travelled, the allowance will be a taxable benefit to the employee. If it is taxable, the employer will also have to deduct CPP, EI and income tax from the payment. The employee may be able to claim employment expenses on their personal tax return as a deduction to offset this taxable benefit.
Do you have employees who are 65 and older? Did you know that you are now required to deduct CPP on their earnings unless an election is filed?
In the past, once an employee started collecting CPP one no longer had to contribute CPP. This is no longer the case. Employees aged 60 to 65 must continue to contribute to CPP regardless of whether they are receiving CPP benefits.
Employees aged 65 to 70 are also required to contribute to CPP unless they complete Form CPT30, Election to Stop Contributing to the Canada Pension Plan. This election takes effect the first day of the following month it is filed. The form must be submitted to the Canada Revenue Agency (CRA) and a copy must be given to the employer.
For more information visit the CRA website at: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/cpp-rpc/cpp-menu-eng.html
CRA was questioned whether a stipend paid to individuals as a ‘training allowance’ while participating in a government sponsored program to improve employability skills and provide work placement opportunities is taxable.
In this case the stipend was received under the Targeted Initiative for Older Workers which is intended to help older workers in vulnerable communities remain active and productive participants in the labour market.
The answer was Yes.
Amounts received in the year by a taxpayer as earnings supplements provided under a project sponsored by a government or government agency in Canada to encourage individuals to obtain or keep employment are included in income as government financial assistance. Generally, the purpose of an earnings supplement is to increase, for temporary periods, the income that an individual receives from a job in order to encourage them to accept a job. These payments should be reported on a T4A by the payer with appropriate income taxes withheld.