If you require your employees to drive vehicles for work and they also use the vehicles for personal use, you may have to report taxable benefits on their paycheques. The Canada Revenue Agency has an online calculator, called the Automobile Benefits Online Calculator, that can help you determine the amount of these benefits. You should prorate the benefit to the employees’ pay periods, meaning you should distribute the benefit over the course of a year rather than all at once. Report an employee’s taxable benefits for an automobile, or the amount they may pay taxes on later, on a T4 slip.
Using the CRA’s Online Calculator for Taxable Automobile Benefits
To use the Automobile Benefits Online Calculator, you need the following pieces of information:
- Whether you or the employee owns the vehicle
- The province where your business is located
- The tax year
- The cost of the vehicle, including tax
- Details on employee reimbursement, if applicable
- Total kilometres driven
- Business kilometres driven
- Personal kilometres driven
You also need to note if the employee agreed to use the alternative method of calculating operating expenses. If so, you need to have that in writing. Based on that information, the calculator tells you how much of a benefit you need to include on your employee’s paycheque for each pay period. In most cases, if you own the vehicle, you only have to report a taxable benefit if your employee uses the vehicle for personal use.
If your employee owns the vehicle, you may have to report any allowances you provide to cover business use of the vehicle as benefits. In these cases, your employees can offset that income by deducting vehicle expenses on their tax returns.
If the calculator instructs you to report a taxable benefit on your employee’s paycheque stub, you need to withhold income tax and pay Canada Pension Plan contributions (or Quebec Pension Plan contributions) on that amount. You don’t have to pay Employment Insurance premiums, because those aren’t a cash benefit.
After using the calculator, you should clear the cache on your browser. Clearing the cache ensures none of your employees’ personal information stays in your computer’s memory in the browser cache.
Payroll for your employees is a cinch when you have this handy online calculator to figure employees’ taxable automobile benefits. QuickBooks Online offers a robust payroll option that helps track employee hours, wages, and benefits you supply to them. The software also helps at tax time when you look for your best possible tax situation. QuickBooks Online can help you maximize your tax deductions. Keep more of what you earn today.