IFITC Chapter_3

IFITC Chapter_3 - Chapter 3 Employment Income Employment...

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Chapter 3 Employment Income
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Employment Income Under Part I, Division B, subdivision a: Inclusions: Sec. 5 – Salary, wages and gratuities Sec. 6 – Other income inclusions arising from employment Sec. 7 – Stock option benefits Deductions: Sec. 8 – Deductions allowed against employment income
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Employed vs. Self-Employed Distinction is important for tax reasons because: Deductibility of expenses is more restricted for employees Employers must remit income tax and EI and CPP payments to the CRA for employees only Non-tax implications for independent contractors: Ineligible for general EI benefits, holidays and employer-paid or other non-cash benefits; Potential liability for services they perform; Cannot collect severance pay; and Lack of job security and so increased economic risk.
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Employed vs Self-Employed Determination Tests: Economic reality or entrepreneur test; Integration or organization test; and Specific result test.
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Employed vs Self-Employed Economic reality or entrepreneur test: Control Ownership of tools Chance of profit/risk of loss
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Employed vs. Self-Employed Integration and organization test: Is the individual doing the work economically dependent on the organization? Specific Result Test: Is the individual engaged in completing a specified work?
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Employment Income Taxation year Reported on calendar-year basis Includes salary, wages and other remuneration including gratuities Reporting based on amounts received (cash basis) Volunteer services exemption
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Specific Employment Inclusions Benefits included in section 6 Benefits from employer stock options in section 7
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Specific Employment Inclusions Value of board and lodging Exception: employment in special work site or remote location if meet conditions: a) Special work site is far enough away that employee cannot reasonably expected to travel daily and temporary in nature so it is unreasonable to establish “self-contained domestic establishment; and b) Board and lodging is necessary for not less than 36 hours & allowance, if received, is reasonable
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Other Fringe Benefits General Rule: Par. 6(1)(a) includes benefits that arise in the course of or by virtue of office or employment Exceptions: Employer’s contributions to: RPP Group sickness or accident insurance plan Private health services plan premiums and provincial health levies, but not provincial health plan premiums Supplementary unemployment benefit plan Deferred profit sharing plan (DPSP) Group term life insurance policy
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Other Fringe Benefits Other Exceptions to par. 6(1)(a): Benefits under a retirement compensation arrangement, an employee benefit plan or trust, already included in income under other provisions; Benefits in respect of the use of an automobile; Benefits from counselling services; and Benefits under a salary deferral arrangement already included in income.
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This note was uploaded on 11/07/2011 for the course ACCT 470 taught by Professor Dixon during the Spring '11 term at Camosun College.

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IFITC Chapter_3 - Chapter 3 Employment Income Employment...

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