Helpful hints for reporting perks

Column explains common Canadian tax tips and pits and solutions

What about those lavish perks of the job? The gifts and awards lavished upon an employee by an employer.  The cash!  The accumulation of copious quantities of business related air miles on the corporate or personal credit card.

T4 preparation and remittance is underway and how does CRA want these goodies accounted for?  Whether an employee or an employer, there may be some helpful tax tips within.

Technically, all these should be reported as taxable benefits but CRA, quite frankly, doesn’t want to deal with the issue of gift items having minimal value so non-cash gifts and non-cash awards are tax free if the accumulative value of all the items in a year is less than $500 for an employee, and if over that amount, only the overage is taxable.  A service award for 5 or more years qualifies for a separate $500 non-cash amount with any overage taxable.

Tax tip … CRA does not combine the two $500 amounts for a $1,000 value.  Each $500 is treated separately so unused room in one cannot offset an overage in the other.

For any and all employees, when it comes to cash gifts and awards, these are 100% taxable and this includes near-cash gifts such as gift cards and certificates.

Tax tip … maybe the free turkey is better than the $50 gift certificate to purchase one?

Are you an employee using a credit card for employment related expenses and accumulating air miles or some other form of loyalty points?  Hopefully it’s your personal credit card with costs reimbursed by your employer.  Since 2009, loyalty points earned on a personal card for employment related expenses have been free of tax implication, unless cash in lieu of service or product is received.

Tax tip … this does not mean an employee can earn tax free points by purchasing a computer for the employer’s office.  The expense has to be an employee expense, not a purchase for an employer.

On the other hand, accumulated points on a business credit card and then transferred to an employee is considered a near-cash gift and the full amount is subject tax.

Tax tip … give the corporate card back to the employer and use your personal card.

The story is different for non-arms length employees.  In other words, gifts given to family members are fully taxable, even non-cash and loyalty points.

But honestly, what about the company coffee mug or t-shirt or shiny trophy bestowed upon a faithful and worthy employee?  Well, if it has the company name or logo on it, it doesn’t figure into the picture at all, not even for family members, although the item must be of nominal value.

Tax tip … that gifted truck to the kid with the magnetic company logo stuck on the doors has to be reported, unfortunately.

Ron Clarke has his MBA and is a business owner in Trail, providing accounting and tax services. Email him at ron.clarke@JBSbiz.ca. To read previous Tax Tips & Pits columns visit www.JBSbiz.net.