Be Aware Of Tax Changes For Employees

EI Benefits. Begin by reviewing income benefits from Employment Insurance when you file your return, in tandem with the possibility of a related clawback of those benefits if you were a high income earner. One of the reasons for this is that all regular EI benefit entitlements were extended by five extra weeks by the January 27, 2009 budget. In addition, that budget increased the maximum benefit entitlement period to 50 weeks from 45 weeks. You will want to learn more about offsetting taxable amounts from this source as well as severance packages with Registered Retirement Savings Plan (RRSP) contributions, in advance of the RRSP contribution deadline of March 1.

Canada Employment Credit. This credit is available to employees to offset employment expenses, and in 2009 the credit has been enhanced to $1,044.

Wage Earner Protection Program. The government extended this program to cover severance and termination pay owed to workers of companies that declared bankruptcy.

Employment Perks. Negotiating new employment contracts, or corporate owner-manager compensation planning should include a review of the taxation of perks and benefits, some of which have also been changed this year. Employees will be treated to new tax free perks of employment under the following circumstances:

1. Loyalty Programs (Frequent Flyer Points) Starting in 2009, the CRA will no longer require frequent flyer points earned while flying on ­business to be included in an employee's income, so long as three ­conditions exist:

ï the points are not converted to cash,

ï the arrangement is not an alternate form of remuneration, or

ï the arrangement is not for tax avoidance purposes.

Where an employer controls the points (e.g., a company credit card), the employer will continue to be required to report the fair market value of any benefits received by the employee as income on the employee's T4 slip when the points are redeemed.

2. Overtime Meals and Allowances Provided to Employees. Beginning with tax year 2009 no taxable benefit will arise if:

ï the value of the meal or meal allowance provided to an employee is reasonable (a value of up to $17 will generally be considered ­reasonable),

ï the employee works two or more hours of overtime right before or right after his or her scheduled hours of work, and

ï the overtime is infrequent and occasional in nature; that is, less than three times a week. If overtime occurs on a frequent basis or becomes the norm, the CRA will consider the overtime meal allowances to be a taxable benefit in the category of additional remuneration.