by RON CLARKE
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Are you an employer who bestows gifts, awards, staff parties, even cash upon your staff?
Well, it’s T4 preparation time and these perks may have an impact on what you need to report on the T4 slips.
To that point, if you’re an employee, you may be surprised by the taxable income reported on your T4 if you have received this type of recognition from your employer.
If the collective value of non-cash items in the calendar year is less than $500 for an employee, Canada Revenue Agency (CRA) doesn’t need to know about this value.
If greater than that amount, the overage must be reported on the T4 as a taxable benefit.
CRA also allows service awards for five or more years of $500 non-cash value, also with any overage being taxable. CRA does not permit the two $500 amounts to be pooled for one $1,000 value.
Instead, each $500 is treated separately so any unused room in one cannot offset overage in the other.
New this year, in recognition of COVID requirements to work from home, the government has introduced a non-taxable employee benefit of up to $500 for an office equipment purchase that is reimbursed by the employer.
And it appears this $500 is separate from the aforementioned $500 non-taxable benefits.
If an employee personally bought a desk, desk chair, etc between March 15, 2020, but before Dec. 31, 2021, the employer could reimburse the employee up to $500 and that $500 will not be considered taxable income.
What about social events for staff that are paid by an employer?
This being non-cash in nature, it’s not taxable to the employee unless the value is greater than $150 per employee including spouse, then the overage is a taxable benefit.
Only six such events per year can be paid by the employer and the attendee list for each event must involve an all-inclusive invite to staff.
Not factored into this $150 is employer supplied safe transportation or overnight accommodation. However, if the value is over the $150 then the whole event is a taxable benefit, and this now includes the cost of the transportation or accommodation if supplied to the employee.
What about cash given to staff rather than non-cash items?
This tax story is different.
CRA requires any cash given to an employee to be reported as taxable income. And this includes near-cash items such as gift cards and certificates since CRA for tax purpose, defines this type of perk the same as cash.
So perhaps it is better to give or get an actual turkey rather than a grocery store gift card.
What about loyalty points, such as air miles?
CRA for years has had the tax system in place for this ever-expanding array of programs and increasing values involved. However, from where the points are accumulated is key for tax reporting.
Accumulated loyalty points on a business owned card that are 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, whether these expenses are reimbursed or not by the employer, these loyalty points do not need to be reported to CRA as income, unless the points are cashed out.
What about random give-a-ways, contests and draws?
As random as this may be for the winner, if its cash or near-cash it is a taxable benefit. Similarly, non-cash prizes factor into the $500 maximum.
Then there is the situation with non-arms length employees, in other words, family members who work for the business.
In this case, all awards and gifts are fully taxable at their full value, including the full value of non-cash gifts and personal loyalty points. Having said this, there is no definitive rule regarding taxable benefits for employed family members who participate in a staff social event provided by the employer.
Finally, and likely the most pressing question, what about swag given to staff?
Those promotional items given away by businesses — logo mugs, shirts, hats, flashlights, posters, pens, and the like.
CRA allows these to be tax free benefits to employees, and even family members get them without tax consequence!
Although the item must be of nominal value, so a gifted car with the company name detailed on the doors doesn’t qualify as tax free swag.
Ron Clarke is owner of JBS Business Services in Trail, providing accounting and tax services.