Employee – Small bussiness accounting solutions

EMPLOYMENT INSURANCE (EI): Voluntary Departure

September 29, 2020 0 By Xienan Shaw

Voluntary departure for CERB purposes has the same meaning as for EI

EMPLOYMENT INSURANCE (EI): Voluntary Departure

In a June 5, 2020 Federal Court of Appeal case, the Court reviewed Service Canada’s decision to deny EI benefits on the basis that the individual left his employment voluntarily. The individual argued that although it was his decision to leave, he had just cause (which would allow him to receive EI). To have just cause, the individual would be required to establish that he had no reasonable alternative but to leave his job.

Taxpayer loses

The Court found no reviewable error in earlier decisions, noting that the individual could have:

discussed his concerns more thoroughly with his employer to explore possible accommodations (rather than asking on arrival at the worksite not to work the night shift);
requested medical leave, consulted with a doctor, or obtained a doctor’s note; or
continued to work until he found other employment.

The Court also noted the individual’s own statement that he could have continued working if his employer had not refused to pay him an additional $3/hour.

The Canada Emergency Response Benefit (CERB) angle

Voluntary departure from a position (quitting) also prevents participation in the CERB. Although there is uncertainty as to whether a “voluntary departure” for CERB purposes has the same meaning as for EI, they will likely be fairly similar.

ACTION ITEM: Eligibility for CERB is dependent upon whether it is the employer or employee’s decision to leave, and why that decision was made. Prior to changing employment status of workers, consult with a human resources specialist or lawyer to understand the implications for both the business and the employees.

CHANGES TO PAYROLL: Correcting Errors

August 30, 2020 0 By Xienan Shaw

COVID-19 pandemic, have made many adjustments to payroll for businesses

CHANGES TO PAYROLL: Correcting Errors

What if I make a clerical, administrative, or system error resulting in a salary overpayment? On April 6, 2020, CRA released the updated guide RC4120 Employers’ Guide – Filing the T4 slip and Summary providing detailed instructions on these such issues.

The employer may elect to have the employee repay the net amount (gross amount less CPP, EI and income tax withheld) overpaid due to the error, provided they meet the following criteria:

no later than three years after the end of the year in which the salary was overpaid
- the employer made the election in the prescribed manner (see below),
- the employee repaid or arranged to repay the net amount of the overpayment;
the employer did not issue a T4 slip with the employee’s correct earnings (that is, with the salary overpayment removed); and
the employer’s business is actively operating.

This election would reduce the cashflow burden the employee would otherwise bear.

The election

The election is made by either excluding the salary overpayment from an original T4 slip or amending a T4 slip to remove the overpayment and reducing the corresponding income tax deducted, along with CPP and EI withheld and remitted.

Repayment after the T4 is issued

If the employee repays or arranges to repay after the original T4 is issued, the employer must amend the T4 slip appropriately, including any relevant CPP and EI adjustments.

After CRA receives and processes the amended T4, it will credit the income tax, CPP and EI remitted on the salary overpayment made in error (including the employer’s share of CPP contributions and EI premiums) to the employer’s payroll program account. The employer can then reduce the next payroll remittance by the credited amount.

Finally, CRA also provided guidance and examples for situations in which the employer does not elect to have the net amount repaid, and the gross amount is repaid instead.

ACTION ITEM: Over the course of the COVID-19 pandemic, many adjustments have been made to payroll for businesses. If a T4 correction or wage adjustment is required, consult with the detailed guidance in publication RC4120, or reach out for assistance.

UNEMPLOYMENT BENEFIT (SUB): TEMPORARY LAY-OFFS

August 30, 2020 0 By Xienan Shaw

Consider setting up SUPPLEMENTAL UNEMPLOYMENT BENEFIT (SUB) plans as individuals transition to traditional EI

TEMPORARY LAY-OFFS: Supplemental Unemployment Benefit

The purpose of a SUB plan is to allow an employer to make supplemental payments to Employment Insurance (EI) benefits, without eroding those EI benefits. As payments under a registered SUB plan are not insurable earnings, EI premiums are not deducted.

In order to be eligible, SUB plans must be registered with Service Canada before their effective date. Plans must:

identify the group of employees covered and the duration of the plan;
cover a period of unemployment caused by one or a combination of the following:
- temporary stoppage of work,
- training,
- illness, injury or quarantine;
require employees to apply for and be in receipt of EI benefits in order to receive payments under the plan;
require that the combined weekly payments from the plan and the portion of the EI weekly benefit rate does not exceed 95% of the employee’s normal weekly earnings;
require it be entirely financed by the employer;
require that on termination all remaining assets of the plan will revert to the employer or be used for payments under the plan or for its administrative costs;
require that written notice of any change to the plan be given to Service Canada within 30 days after the effective date of the change;
provide that the employees have no vested right to payments under the plan except during a period of unemployment specified in the plan; and
provide that payments in respect of guaranteed annual remuneration, deferred remuneration, or severance pay will not be reduced or increased by payments received under the plan.

A plan registered with Service Canada is not required to be a trust. It could be funded from general revenues.

Income tax treatment

For income tax purposes, a SUB plan is defined more restrictively, as it is required to be a trust to which the employer makes payments. Such plans can be registered with CRA, in which case any income earned within the SUB trust is non-taxable. Whether or not registered, receipts are taxable to the employee. Payments to a registered SUB plan are deductible to the employer if made no later than 30 days after year-end. Payments to SUB plans are not otherwise deductible, so a plan structured as a trust must be registered for employer contributions to be deductible.

A SUB plan which is not a trust would not be subject to the above rules. Deductibility of payments would follow the general rules for all expenses for income tax purposes.

Interaction with the Canada Emergency Response Benefit (CERB)

The provisions that exist under the EI system for employers to make additional payments to workers through SUB plans do not apply to employees who are receiving the CERB.

Amounts received by individuals from any employer in excess of the $1,000 threshold would create an obligation for the individuals to repay CERB they received for the same benefit period.

Employers that wish to do so may continue to submit a SUB plan to Service Canada. By registering a plan, employers can make payments to employees who are currently receiving EI regular or sickness benefits and will also be prepared should employees need EI benefits at a future time.

ACTION ITEM: As CERB is scheduled to end September 26, 2020, many individuals will now begin to rely on the EI system. The time may be right to consider setting up SUB plans as individuals transition to traditional EI.

Reimbursing Employees for Technology Costs: Working from home

August 23, 2020 0 By Xienan Shaw

Up to $500 reimbursement to employees for the personal purchase of equipment for working remotely

Reimbursing Employees for Technology Costs: Working from home

In an April 14, 2020 French Technical Interpretation, CRA was asked whether amounts paid to an employee for costs of equipment for working remotely would be a taxable benefit.

Generally, a reimbursement for a personal purchase of equipment used for working remotely would be a taxable benefit. However, CRA noted that in the context of the COVID-19 pandemic, which has required many employees to work remotely, acquisition of computer equipment may be primarily for the employer’s benefit. In that context, CRA indicated that no taxable benefit would arise for a reimbursement, supported by actual invoices or receipts, of no more than $500 towards such equipment.

CRA also stated that a non-accountable allowance would always be taxable, as no provision would provide for an exclusion of such amounts.

CRA did not comment on the consequences if the equipment were used exclusively for employment and was owned by the employer, not the employee. CRA has indicated in the past that, where equipment is property of the employer, and any personal use is incidental, there would be no taxable benefit to the employee.

ACTION ITEM: Consider providing a reimbursement to employees for the personal purchase of equipment for working remotely of up to $500.

CPP/EI RULINGS: Do they Trigger Payroll Audits?

March 4, 2020 0 By Xienan Shaw

CRA comments on whether a CPP/EI ruling triggers follow-up assessing and review.

EMPLOYMENT EXPENSES Costs of an Assistant

February 19, 2020 0 By Xienan Shaw

A deduction can be claimed for salary paid to an assistant. Any deduction must be for salary, requiring it be paid to an employee.

EMPLOYMENT EXPENSES Costs of an Assistan

A November 5, 2019 Tax Court of Canada case reviewed the deductibility of employment expenses by a manager overseeing the Canadian sales force and operations of a multinational manufacturer of dental instruments and products. The taxpayer’s employer had no Canadian office, and she travelled extensively to meet with sales representatives, dealers and customers throughout Canada.

Expense of assistant

Almost half of the taxpayer’s claimed expenses, which exceeded $80,000, related to her husband’s role as her assistant. The Court noted that a deduction can be claimed for salary paid to an assistant, but that there were several problems with her claim, including the following:

The taxpayer’s husband was treated as self-employed and not as an employee. Any deduction must be for salary, requiring it be paid to an employee. This alone was fatal to the deduction claim.
The amount was not paid to her husband. Rather, they simply had a single joint bank account through which they both transacted. Lack of payment alone would prevent any deduction.
The taxpayer’s employer indicated it was the taxpayer’s decision whether she required an assistant. As her employer didnot require her to hire an assistant, no deduction was available. This item alone would also prevent any deduction.
The husband’s services described were largely clerical, administrative, secretarial or driving, for which his hourly fee of $75 was not “anywhere close to the range of reasonable”.
The husband’s hours set out in quarterly billings were not supported – he could only account for a small fraction of the hours invoiced.
The husband claimed business expenses of almost 75% of his fees; however, the couple could not describe what expenses he incurred. The taxpayer “was sure this was a mistake”.

No deduction was allowed for these costs.

ACTION ITEM: Support and documents are often requested by CRA when deductions against employment income are claimed. Ensure to retain all such support. If no T2200 has been provided for the current year, enquire with your employer as to whether one is available for the next.

EMPLOYMENT EXPENSES Commuting

December 2, 2019 0 By Xienan Shaw

Commuting employment expenses taxable? Can i deduct employment travel costs, job, business related travel cost from taxes?

EMPLOYMENT EXPENSES Commuting

In an August 15, 2019 Tax Court of Canada case, at issue was the deductibility of a number of employment expenses (primarily travel, lodging and motor vehicle expenses) incurred by the taxpayer. While the taxpayer resided in Ottawa, he signed an employment contract with a company based in Regina. The employment contract stated that the new employment position would be “based from our yet to be determined office in Ottawa, Ontario.” For the 2012 and 2013 tax years, the taxpayer shuttled by air between Ottawa and Regina weekly. In order to deduct travel costs incurred by the employee, the employee must have been required to travel away from the employer’s place of business.

The taxpayer argued that his home in Ottawa was a place of employment, and therefore, costs of travel between his work location in Ottawa, and the work location in Regina, were deductible as they were incurred in the course of employment.

Taxpayer loses, mostly

The Court rejected the taxpayer’s assertion, finding that the employer did not have a place of business in Ottawa. The Court observed that the fact that the employee might choose to “squeeze in” work (in this case on some Mondays or Fridays) at his home in Ottawa did not, without more, constitute the home being an employment location. Further, there were no photographs of the home office, testimony describing it, or home office expenses claimed. The Court stated that the employment contract did not alter its decision as there was no evidence that the employer made any effort to find an office in Ottawa, and no evidence related to work pertinent to Ottawa was provided.

As such, travel between Ottawa and Regina was personal, and the associated lodging and travel costs were denied.

The Court also reiterated that the appeal was considered without regard to the distance between the employee’s home and the employer assigned office: the two locations could be in the same municipality or different provinces. In other words, commuting to work, no matter how far, is considered personal. However, note that there are some exceptions to this rule, such as where the individual travels to a temporary special work site, or a remote work location.

ACTION ITEM: If considering the acceptance of employment that requires significant commuting, consider that the commuting costs likely will not be deductible.

Workplace vs. New Generations

September 23, 2019 0 By Xienan Shaw

We live in a dynamic world where the pace of change is
speeding up rapidly. It’s getting more complex and competitive. New strategies,
sharpened skills and tactics will be required.

Businesses have to do something to keep afloat, especially
in this period of recession.

Here’s what they have to do: to hire a new generation of
employees. There are no terrible businesses; just management through lack of
vision and leadership that fail to explore the opportunities that lie before
them.

Managers that are accustomed to using specific ways to
engage their old generations of workers are going to have to change their ways
if they hope to engage and retain their new cohorts; the millennials. They
bring an increased number of workers in the workforce and some remarkable
changes.

Given their consistent increase of workers in the office, it
is crucial to understand who these employees are and what they want from your
organization.

Millennials have a significantly different outlook on what
they expect from their employment experience. They are well-educated,
technology-skilled, very self-confident, can multi-task and have plenty of
energy.

They
prefer to work in teams rather than individually.

Some ways to engage the Millennials.

The millennials are very different from the old generation
of workers. This means that (and as stated earlier) creating engagement
strategies and techniques is one of management’s big goals. When trying to find
ways to engage new generation workers, consider these two thoughts; first, are
millennials, and the older generation needs different? Are they different
enough to demand different engagement strategies for each generation? Second,
identify which engagement drives were appropriate for each age. A
millennial-friendly office is not just about beauty; it is more about improving
the overall workplace experience for employees.

Here are some ways of making your office
millennial-friendly:

1. Have a simple home comfort in the workplace. Young
people don’t separate home life from work as much as the previous generation.
When they are at work, they need to be comfortable as they usually are at home.
Employers can accommodate simple home comforts like a kitchen with places that
stores food or snacks, areas with couches for collaborations with coworkers,
quiet spaces for independent work.

2. Creating
spaces for collaboration and creativity. This gives young employees
varieties in the workplace and supports their desire for social interaction
during the day. This means fewer cubicles and private offices and more open spaces
for communications. Now, these spaces are not just another boardroom; but
breakout spaces, lounges. Hallways, kitchens or areas with couches. This kind
of environment has been proven to increase productivity. Employees are likely
to be more productive and stay engaged when they have the freedom to move
around while working.

3. Alter your work environment to keep up with
modern needs. A modernized office environment can inspire and engage young
workers and increase retention. Put their mindset into consideration and create
a work environment in which they will succeed. This will show that you care and
they will work harder and stay longer.