Category: Private Post: Summary Personal Tax

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.