2018-01-31 00:00:00TaxesEnglishReduce tax season stress by reporting employee income correctly by understanding and following Canada Revenue Agency rules and guidelines...https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2018/02/Accounting-professional-reviews-employee-holiday-bonuses-when-filing-taxes.jpghttps://quickbooks.intuit.com/ca/resources/taxes/tax-filing-employee-holiday-bonuses/How to Handle Employee Holiday Bonuses During Tax Time

How to Handle Employee Holiday Bonuses During Tax Time

1 min read

Rewarding employees for a job well done is a great way to increase morale, but it’s important to know how to report these items during tax time to avoid penalties and fines. Unless you give the gifts during the holidays or for special occasions, the CRA always considers it income. Under the gift tax rule, if an employee receives more than $500 in non-cash gifts in a single year, that income is taxable. So, keep that in mind when you plan those extravagant catered Christmas parties where the cost is $150 per person or more or take your employees out for meals at the latest gourmet restaurant. Some gifts are always considered taxable regardless of how much they are, including near-cash gifts and awards such as gift cards to a favorite retail store, travel points or reward points to apply to a family vacation and even gifts given by shareholders. Small, low-value items such as chocolates, T-shirts, plaques and mugs are exceptions to the rule and do not count as income, so you can feel free to send out Godiva chocolates or company swag. Other items that are exempt include the business use of a vehicle and reimbursements for travel expenses. You can reimburse an employee for mileage provided it follows the CRA guidelines for reasonable per kilometer allowance. You may also reimburse an employee for meals and travel or offer an advance for expenses as long as they keep track of any amounts they spend and submit an expense report with receipts. Offering a small reward is an excellent way to show thanks to an employee for a job well done, but it’s important to keep track of these amounts to avoid penalties in the event of an audit.

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.

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