Table of Contents
- 1️⃣ Introduction to Employment Income and Employment Expenses
- 2️⃣ Employment Income – What Is Included
- 3️⃣ Recording Employment Income on the T4 and T1
- 4️⃣ Items to Watch for on the T4 Slip
- 5️⃣ Employment Amounts on T4A and T4PS
- 6️⃣ Reporting Casual Labour, Tips & Odd Jobs (No Slip Issued)
- 7️⃣ Reporting Tips & Casual Labour on the T1
- 8️⃣ Reporting Wage-Loss Replacement Plan Income
- 9️⃣ CPP and EI Premiums and Tax Credits
- 🔟 Schedule 8 and T2204 (CPP & EI Overpayments)
1️⃣ Introduction to Employment Income and Employment Expenses
- Employment income = money and taxable benefits earned from working for an employer.
- Main source document: T4 slip.
- Employment income affects:
- Total taxable income
- Tax credits
- Refund or balance owing
- Employment expenses are deductible only if CRA conditions are met.
- Employer must complete T2200 (Declaration of Conditions of Employment).
- CRA reviews employment expense claims closely — keep receipts.
- Learn manual reporting before relying on tax software.
2️⃣ Employment Income – What Is Included
Employment income includes:
- Salary, wages, commissions
- Bonuses, overtime, vacation pay
- Severance and retiring allowances
- Taxable benefits (company car, employer-paid premiums, RRSP contributions, stock options)
- Certain reimbursements
Other related slips:
- T4A – Other employment-related income
- T4PS – Profit-sharing income (dividends)
Key rule:
👉 Most taxable benefits are calculated by the employer and already included on the T4.
3️⃣ Recording Employment Income on the T4 and T1
T4 information flows to T1 as follows:
- Box 14 → Line 10100 (Employment income)
- Box 16 (CPP) → Federal tax credit (Line 30800)
- Box 18 (EI) → Federal tax credit (Line 31200)
- Box 40 → Informational (already included in Box 14)
- Union dues → Line 21200
- RPP contributions → Deduction (affects RRSP room)
- Multiple T4s must all be entered separately.
Accuracy in box mapping prevents CRA reassessments.
4️⃣ Items to Watch for on the T4 Slip
Common mistakes:
- Ignoring lower section of T4
- Missing:
- Box 67 (Retiring allowance – Line 13000)
- Box 85 (Private health premiums – medical credit)
- Union dues
- Payroll charitable donations
- Assuming all income is in Box 14
- Rounding numbers instead of using exact figures
Best practice:
✔ Review every box
✔ Use a checklist
✔ Enter exact amounts
5️⃣ Employment Amounts on T4A and T4PS
T4A
Used for:
- Wage-loss replacement benefits
- Research grants
- Certain retirement or non-standard employment income
👉 Reported on Line 10400 (Other employment income)
T4PS
- Reports profit-sharing dividends
- Reported as dividend income (not employment income)
- Eligible dividends require gross-up calculation
Key difference:
- T4A = employment-type income
- T4PS = investment (dividend) income
6️⃣ Reporting Casual Labour, Tips & Odd Jobs (No Slip Issued)
If no T4 is issued:
- Income must still be reported.
- Report on Line 10400 as other employment income.
- Never estimate income — use client records only.
- Tips (cash or electronic) are taxable.
- Encourage clients to maintain records.
CRA audits frequently focus on unreported tips.
7️⃣ Reporting Tips & Casual Labour on the T1
Classification matters:
A. Single employer
→ Report as other employment income (Line 10400)
B. Multiple clients
→ Report as business income
→ Eligible expenses can be deducted
Examples of deductible business expenses:
- Vehicle expenses
- Advertising
- Cell phone (business portion)
Correct classification affects allowable deductions.
8️⃣ Reporting Wage-Loss Replacement Plan Income
Wage-loss benefits are taxable.
Two reporting situations:
1. Reported on T4
- Included as employment income
- Employee contributions deducted from taxable amount
2. Reported on T4A
- Insurance company specifies:
- Total benefit
- Deductible contributions
Formula:
Taxable amount = Total benefit – Employee contributions
Always verify supporting documentation.
9️⃣ CPP and EI Premiums and Tax Credits
CPP (Canada Pension Plan)
- Retirement pension program
- Reported in Box 16
- Credit claimed on Line 30800
EI (Employment Insurance)
- Temporary income support
- Reported in Box 18
- Credit claimed on Line 31200
Important facts:
- Annual maximum contribution limits apply.
- Multiple jobs can cause overpayment.
- Overpayments are refundable.
- Enhanced CPP includes:
- Credit portion
- Deduction portion (Line 22215)
Missing CPP/EI may indicate exemption (age, ownership, disability).
🔟 Schedule 8 and T2204 (CPP & EI Overpayments)
Overpayments occur when:
- Client has multiple employers
- Each employer deducts up to maximum separately
Forms used:
Schedule 8
- Calculates CPP overpayment
- Refund appears on Line 44800
T2204
- Calculates EI overpayment
- Refund appears on Line 45000
Key points:
- Refund is dollar-for-dollar.
- CRA calculates automatically when all T4s are entered.
- Very common for clients with multiple jobs.
- Always check yearly maximum limits.
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