Your Employer Tax Responsibilities
As an employer you are probably well aware of your obligations for making the proper deductions from employee’s wages which in turn have to be submitted to the proper government department. These are deductions such as CPP and EI contributions as well as tax. What you may not be aware of is there could be additional responsibilities for deductions.
You may be providing other benefits to your workers because of the type of relationship you want to set up with them. For example, some Companies will provide loans to their employees at a reduced rate rather than them having to seek out other ways for them to assist them with their financial needs. Or the Company may have a policy where they cover transit fees for employees who live a distance away from the work site.
Any of these and many more could be perceived by the CRA as additional benefits to the employee and may be subject to tax. If the benefit is other than some type of cash remuneration then you may have to set a cash value on that benefit. For example, a parking pass, or incentives offered by way of gifts or trips.
Why you are surely not going to know every circumstance that would be applicable to your potential tax obligation in this area of the law, you can implement 2 questions that will help you determine this.
- Are you providing some personal type benefit to the employee?
- Are you providing a benefit to a third party that is not arms length with the employee?
If the answer is yes, then you must put a value on this benefit. In addition to this you must also determine if the GST/HST is applicable and if so the amount.
Once you know the value you will then need to add this to the employer’s income for the pay period it is applicable for, or if it is an ongoing benefit then it is to be applied for each period.
As with any of the other business tax laws this area is complicated. For this reason the majority of business owners no matter what the size of their company choose to use the services of a professional to assist them with their employer tax obligations. It may be that you will need a payroll clerk, or a bookkeeper. Talk to your business accountant to see what they suggest you use for assistance. These experts totally understand the complexity of the tax laws and know what kind of expertise is required to make sure a business tax payer is complying with the law.