Tax Tips and Pits: How to report all those perks and gifts at tax time

"How are these reported to Canada Revenue Agency (CRA), or are they?"

T4 preparation is soon underway.  What about those gifts and awards lavished upon an employee, the bountiful business related air miles accumulated? How are these reported to Canada Revenue Agency (CRA), or are they?

If the collective value of non-cash items in a year is less than $500 for an employee, CRA doesn’t need to know about them.  If over that amount, only the overage has to be reported on the T4 as taxable.

Separately, CRA also allows service awards for five or more years of $500 non-cash value, with any overage taxable.

CRA does not permit the two $500 amounts to be pooled for a $1,000 value.  Each $500 is treated separately so unused room in one cannot offset overage in the other.

The story is different for cash gifts and awards, including near-cash items such as gift certificates.  These are 100 per cent taxable so perhaps it is better to give or get an actual turkey rather than a grocery store gift card.

Loyalty points, such as air miles, are well in the sights of CRA.  Accumulated points on a business loyalty card and given to an employee are considered a near-cash gift and the full amount is subject tax.

If however an employee earns loyalty points on a personal card for the purchase of employment expenses, this value needs not be reported to CRA, unless cash is taken in lieu of a non-cash gift.

If an employer wishes to perk an employee, rather than having the employee use a business card, encourage them to use their own personal card so they can earn the loyalty points tax free.  Then reimburse them for their employment expenses.

There is a limit to this though, loyalty points earned on a personal card for purchases made by an employee directly for an employer, say a shredder for the office, are not tax exempt.

Then there is the situation with non-arms length employees – family members.  All gifts and awards are fully taxable.  This includes the full value of non-cash gifts and personal loyalty points.

What about swag?  … those ubiquitous promotional items given away by businesses – the company logoed mugs, shirts, hats, flashlights, posters, pens and the like.  If given to an employee – even a family member – CRA allows these to be tax free benefits, although the item must be of nominal value.  Of course then, the gifted pick-up truck with magnetic company logos on the doors has to be reported to CRA.

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.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Severe storm warning remains in effect for the Kootenays

Two special weather statements have been issued for the West Kootenay

Update: Suspect in Montrose gas station stabbing new to the area

Police say the 30-year-old suspect stabbed a Montrose gas station employee

Trail family rallies for Ronald McDonald House

“We always described it as our oasis in the middle of the desert.”

Powerful thunderstorms called for the West Kootenay this weekend

Environment Canada issued a special weather statement Thursday afternoon.

RDKB launches survey to address housing needs in the district

Communities in the district include Trail, Grand Forks, Rossland and Fruitvale

11 new COVID-19 cases in B.C. as top doc urges caution amid ‘encouraging’ low rates

Dr. Bonnie Henry also announced that two care home outbreaks would be declared over

Surrey mayor’s party under fire for ‘sickening’ tweet accusing northern B.C. RCMP of murder

Mayor Doug McCallum says tweet, Facebook post ‘sent out by unauthorized person’

Father’s Day Walk Run for prostate cancer will be virtual event this year throughout B.C.

The annual fundraiser for Prostate Cancer Foundation BC has brought in $2.5 million since 1999

Dr. Bonnie Henry announces official ban on overnight kids’ camps this summer

New ban comes after talking with other provincial health officials across the country, Henry says

Senior man in hospital after unprovoked wolf attack near Prince Rupert

Conservation officers are on site looking for the wolf

VIDEO: NASA astronauts blast off into space on SpaceX rocket

Marks NASA’s first human spaceflight launched from U.S. soil in nearly a decade

PHOTOS: U.S. cities brace for increasing unrest over police killing of George Floyd

Minnesota Gov. Tim Walz has fully mobilized the state’s National Guard

$200,000 Maybach impounded after ‘L’ driver caught excessively speeding in Vancouver

Meanwhile, the supervisor sat in the passenger seat, police said

COVID-19 cancelled their wedding plans, so they married on a B.C. mountaintop

Ceremony was live streamed to friends and family around the world

Most Read