Taxation of Employer-Provided Benefits to Change in 2021

Evelyn Jacks

The pandemic has wreaked havoc on personal and business lives and continues to do so. Those in the bookkeeping and tax accounting services will need to digest and properly report various pandemic relief provisions including the new detailed information required on new T4 Slips – requirements for all employers, by the way.

These changes were covered in detail at Knowledge Bureau’s Advanced Personal Tax Update on January 20 but are worth noting for those who could not attend.  The complete course and recordings are available to advisors who are still interested in upskilling. 

Specific to the reporting of earnings, it will be required to break income down on the T4 to four specific periods:

Box 57 – March 15 to May 9

Box 58 – May 10 to July 4

Box 59 – July 5 to August 29

Box 60 – August 30 to September 26

Most accounting software with payroll modules will do this automatically. 

When it comes to reporting reimbursements and allowances received from the employer it will be necessary to review whether a benefit is taxable this year, what the value of the benefit is and whether payroll deductions should have been made for it.  That is because CRA has made some exceptions to their normal rules.   

For the period March 15, 2020 to December 31, 2020 CRA has provided for three important exceptions: 

Commuting costs.  CRA will not consider a taxable benefit to have occurred where the employer reimburses the employee for the additional costs of commuting over and above normal costs.  This can include costs for employer-provided vehicles as well.  Specifically, if the employee had to travel to the regular workplace for any purposes to perform duties at home instead, a tax-free reimbursement will be allowed.  This can include things like picking up equipment or supplies from the office.  Allowances paid must be reasonable.

If the employer provided a parking spot for the employee at the place of employment, that spot, normally a taxable benefit, will not be taxable in the period mentioned.  So, there will be two calculations for 2020 for that parking spot – one taxable period up to March 15 and the rest of the year, tax free.  

If the employer reimbursed the employee for the cost of a computer or chair or other requirements to work from home, the first $500 reimbursed per employee will not be taxable.  Amounts above this however will be.

There are some interesting rules around cell phone reimbursements.  Specifically in the case of the phone service costs, there is no taxable benefit if the reimbursement is for costs that are reasonable, the plan is a “basic” plan with a fixed cost and the employee’s personal use of the service is not more than the basic plan cost.  Personal use is always taxable.  Note that employers are responsible for determining the percentage of employment use.

Final note:  benefits that are taxable are also pensionable for CPP purposes.  EI and Income Tax deductions are also required according to normal rules; however, when it is a non-cash benefit, it’s not insurable.

These rules are covered in Knowledge Bureau’s Advanced Payroll Course; as well the Advanced Tax Update which is now available online for those who missed the CE Summits – both provide a broad and expansive amount of critical information for tax, bookkeeping and financial specialists who want to stay on the cutting edge of change.