Acco340Lecture 2-3 - Employment Income

Not deductible against income but can provide a

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not deductible against income   but can provide a credit against taxes otherwise  payable.  Examples: -Employee contributions to QPP/CPP and to EI programs -Charitable donations -Contributions to federal political parties -Eligible medical expenses, including contributions made to an employer’s Health Care Plans or other private medical  plans -Tuition fees not reimbursed -Public transit monthly pass expenses -Adoption expenses -Income taxes withheld at source or instalment payments  Note: Tax credits will be discussed in Lectures 11 & 12                                                                                              .                                                                                                                     EMPLOYEE AND PARTNER GST REBATE Employment is not considered to be a commercial activity, therefore employees cannot be GST registrants and  consequently   employees can not recover any GST paid   in the normal manner (ie, Input Tax Credit)   in respect to  expenses incurred (and deductible under various ITA sections) in order to earn employment income.
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Partners  that incur deductible partnership related expenses, that are not included in the partnership P & L,  also may  incur GST  that are not recovered in the normal manner. Form GST370 – “Employee and Partner GST Rebate”   is filed with their tax returns and  allows for a special refund of  GST paid by employees and partners, but not reimbursed . GST refund is taxable in the year the refund is received, not the year GST is paid as part of a deductible expense. (eg,  GST paid in 2008 is claimed as an expense in 2008  and is claimed as a refund in the tax return pertaining to 2008 that  is filed in 2009. If the refund is received in 2009, then it is reported as taxable income for 2009) Formula for carving out the GST in 2009 that is embedded in a sale price is:                     5/105 X invoice amount that includes the GST = GST amount paid                    eg,  5/105  X$105 = $5 GST Paid                       Conditions for a Rebate include: o individual must be an employee of a GST registrant or a partner in a partnership that is a GST registrant (eg.  employees of financial institutions are not eligible) o employees of charities, not-for-profit organizations, municipalities, universities, schools & hospitals – (M.U.S.H.),  are eligible as long as their employers are GST registrants; as well as employees of provincial governments,  Crown and federal governments.
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