Acco340Lecture 2-3 - Employment Income

Employers can deduct payments made to a sda but

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             Employers can deduct payments made to a SDA, but employees can not defer taxes, as amounts are reported on accrual           rather than cash basis,  ie, no tax incentive for employee because will pay cash tax on income not received Exclusions   to   ITA   248(1)   are   Registered   Pension   Plans,   Deferred   Profit   Sharing   Plans,   Profit   Sharing   Plans,  supplementary unemployment plans, sabbaticals, deferrals for professional athletes.                                                                    Summary Re. Bonus & Salary Deferral Arrangements                         TYPE OF  BONUS  ARRANGEMENT                                                         TAX CONSEQUENCE                  1.Standard bonus                                                                                      -Employer deducts when declared                       If paid within 180 days  of business year end                                          -Employee includes when received
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                 2. Other bonus                                                                                               If paid after more than 180 days  after employer’s year end, but              -Employer deducts when paid                      prior to 3 years  after the end of year in which bonus was earned           -Employee includes when received                    Salary Deferral Arrangement                       If paid more than 3 years  after the end of the year in which the             -Employer  deducts  when earned                       bonus was earned                                                                                 -Employee includes when earned                                                                                  EMPLOYEE VERSUS SELF-EMPLOYED An individual  can work for an organization under two possible roles – 1) as an  employee; or 2)  as an  independent  contractor  (aka, a self-employed individual).
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