2018-01-31 00:00:00 Tax Professional English Boost your clients' deductions at tax time by helping them make the most of their employee benefits. Learn why it can be important for your... https://d1bkf7psx818ah.cloudfront.net/wp-content/uploads/2018/02/12110838/Female-accountant-reviews-employee-benefits-tax-deductions-with-small-business-owner.jpg Advising Clients on Tax Deductions for Employee Benefits

Advising Clients on Tax Deductions for Employee Benefits

2 min read

Competition for top employees gets fiercer by the day. To attract talent and stand out from the competition, business often must do more than offer a competitive salary. For your business clients, the difference in landing a dynamite hire and having that person pass them over for a competitor often lies in the employee benefits package, and fortunately, at [tax time](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/business-expenses.html#Salaries,wages,andbenefits(includingemployer’scontributions)), your client can write off many of the employee benefits they offer, as business expenses.

Employment Insurance Premiums

Employment insurance is a Canadian government program that provides temporary assistance to workers who find themselves out of work through no fault of their own. Its funding comes from the Employment Insurance Fund, to which employees automatically contribute via mandatory payroll deductions. The law requires employers to contribute to the fund, as well, on behalf of each of their workers.

If your client pays EI premiums on behalf of its employees, it can deduct what it pays from its taxes as a business expense. By keeping accurate and up-to-date records of payments made into the EI fund, you can help your client claim this deduction at tax time.

Workers’ Compensation Payments

In addition to compelling employers to help fund the EI program for displaced workers, Canadian law also requires companies to contribute to workers’ compensation, a separate program designed to help injured workers. Rather than filing suit against their employer in court, workers who get hurt on the job file a workers’ compensation claim, and if successful, they can collect damages for their injuries.

By staying current with workers’ compensation insurance premiums, companies not only avoid government sanctions but also enjoy a level of protection from lawsuits. As an added benefit, Canadian businesses receive a tax deduction for all payments made into the workers’ compensation program.

Canada Pension Program Contributions

The CPP, Canada’s government retirement program, is available to all workers, public, private, and self-employed. Contributions to the program are compulsory for both employers and workers, and when an employee retires or becomes disabled, they can begin collecting benefits. If they pass away, their surviving spouse or common-law partner or their dependent children under 25 can continue to collect benefits on their behalf. Businesses can deduct all payments made into CPP on behalf of their employees at tax time.

Miscellaneous Benefits

Depending on a few factors, a business may be eligible to deduct any number of miscellaneous benefit expenses on top of those listed above. Potentially, your clients may be able to claim deductions for the following expenses:

  • Provincial insurance premiums, such as Quebec’s income replacement plan
  • Premiums paid on behalf of employees for disability or life insurance
  • Wages paid to the owner’s children for age-appropriate help in the office

Employee benefits represent a potentially significant source of tax deductions for your client. The more benefits they offer, the easier it becomes to attract quality talent, and they can get some of that money back in the form of a tax break. You can help your clients make the most of their employee benefits by ensuring they understand the applicable tax rules.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

Related Articles

One Step Over the Line: The Risks of Aggressive Tax Planning

Everyone wants to save money on their taxes, and it’s good to…

Read more

Applying Accounting and Tax Rules to Real Property Rental Income

There are a number of accounting and tax considerations tied to earning…

Read more

Common Tax Deductions for Personal Trainers

Of course you want to keep as much money as you can…

Read more