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AIT805 Taxation I LN4 Ch.3 2009 PP slides

AIT805 Taxation I LN4 Ch.3 2009 PP slides - TAXATION I...

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TAXATION I LESSON NOTES (LN) Chapter 3 ___________________________________________________________________ Income from Office and Employment The following approach is recommended in reviewing this chapter: Read the text 1 , chapter 3 Read the following lesson notes on chapter 3. Practice use of the CCH Tax Research Library, on CD-ROM . Learning Outcomes: Review the learning outcomes for this chapter listed on page 80 of text. The following topics are covered: 1. General Rules. 2. Employee vs. Independent Contractor – Defining an Employee for Tax Purposes. 3. Defining the Taxation Year. 4. Determining the Amount of Remuneration. 5. Timing of Receipt of Remuneration. 6. Taxation of Benefits. 7. Personal Living Allowances and Benefits. 8. Special Work Sites and Remote Location. 9. Disability-Related Benefits. 10. Employment Insurance Benefits. 11. Indirect Benefits. 12. Automobile Benefits. 13. Standby Charges. 14. Operating Cost Benefit. 15. Vehicles Other Than Automobiles. 16. Automobile Allowances. 17. Employee Loans. 18. Taxation of Allowances. 19. Housing Losses and Subsidies. 20. Stock Options. 21. Employee Deductions. 22. Concluding Concepts to Remember. AIT805 Taxation 1: LN 4 - Ch. 4 Income from Office and Employment 4-1
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Calculating net income from office and employment is generally the first step in calculating net income for tax purposes for individuals. 1. General Rules There are few deductions available against employment income, which includes all income and related benefits enjoyed by an employee. ITA 153(1)(a) requires an employer to withhold Income Tax and remit to the CRA. The computation of Net Income from Employment: Section 5 – defines wages plus salaries plus other remuneration, plus Section 6 – lists the inclusion of benefits enjoyed plus allowances (see page 117), plus Section 7 – relates to the rules for stock option benefits, minus Section 8 – advises on the limited employee deductions , equals The Net Income from Employment 2. Employee vs. Independent Contractor – Defining an Employee for Tax Purposes. Independent contractors are considered to be earning income from self-employment and are not subject to the same deductible limitations in computing Net Income as someone earning Employment Income. It is therefore tempting for individuals to want to classify yearly earnings from self-employment. See page 119 –as to why the distinction is important. Some of these are : From the employee viewpoint: - Availability of deductions are restricted, - Employee withholdings (installments by self-employed individual), - CPP and EI withholdings - Fringe benefits by employee From the employer viewpoint: - CPP, payroll taxes, or EI not required, - Fringe benefits not paid for employee (health care, dental etc.) CRA Guide, RC4110 Rev. 06/12 - Employee or Self-Employed ? lists some factors to be considered to determine if an individual is an employee, master and servant relationship , or an independent contractor. Some questions to ask are if : The Worker Has control over the work performed?
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