Canadians are a little down this holiday season, at least when asked about holiday workplace perks. A recent survey found only 44 per cent of Canadians expect to indulge in a traditional rite this season: the employer-sponsored holiday party. And extra dollars will be even harder to come by, as only 17 per cent are expecting a year-end bonus.
And while that’s already discouraging, there is some more bad news: if you are invited to a company party or receive a bonus, you may have to share that joy with the Canada Revenue Agency.
An H&R Block Canada sponsored survey, conducted by Leger in November of 2013, asked 1,503 Canadians some basic questions about what is and is not a taxable benefit. Most Canadians gave the correct answer when asked: “True or false, holiday bonuses are considered income and must be reported on your income tax?” A full 72 per cent said that is true, with 11 per cent incorrectly answering “false” and the remainder unsure. Of those who got it wrong, Ontarians, Quebecois, Maritimers and the general 18 to 34 demographic were more likely to believe cash bonuses aren’t taxable.
Canadians didn’t do as well on the next two questions: must you report a $50 gift card given to reward good performance, and are prizes won in an employee-only draw a taxable benefit? Forty-eight per cent were incorrect about gift cards and 59 per cent wrong about draw prizes. Non-cash gifts are just as taxable as cold hard cash – once the total annual value exceeds $500. That means the theatre tickets and bottles of wine are all just fine until that $50 gift card puts you over the $500 mark. Then all the non-cash goodies over $500 have to be reported to the CRA.
And the big festive shindig? Forty per cent of Canadians think Christmas parties are not taxable benefits, but again, this too depends on your employer’s generosity. If the cost of the party is more than $100 per employee, not including transportation and accommodation, it must be reported on your T4 slip. And once you add up the bill for food, those two drink tickets and the venue itself, you get to $100 pretty quickly.
And there are other benefits you may need to report. If, after the holiday cheer, an employer sets you up with a fitness club membership, it is taxable unless you can show the employer benefits more than you. Building an all-employee gym in the workplace is not taxable. And if you’re take a course, ensure the primary beneficiary is the company, because if it’s you the taxman will come knocking.
The total value of all taxable benefits should appear in Box 40 of your T4 slip. Check with your employer to make sure the company is withholding tax at source for these amounts; if not, you’ll end up paying for them when you file your tax return.
And if you feel like the CRA is throwing some “bah humbug” onto your holiday cheer, well, perhaps no one would blame you. But don’t let it get you too down. Hitting the office party is a still a good idea, even if you have to pay a little tax for the privilege. Just don’t drink and drive!
A small business tax specialist with H&R Block, can discuss tax tips for small business owners and self-employed Canadians.
This information is provided by H&R Block Canada. The information provided here is a general list for information purposes. Taxes vary among individuals so always consult a tax professional for certainty. I invite you to visit hrbtaxtalk.ca to view tax queries posted by others or post your own question. Therefore, no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this bulletin can be accepted by H&R Block Canada, Inc. or Larkycanuck.com
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