Canadians are unaware that their professional bonuses are taxable

As the end of the year approaches, 44% of Canadians expect that their employers will organize a Christmas party, according to a recent survey. But few of them realize that a workplace party can have repercussions on their tax return. Explanations.

At the end of the year, just less than half of Canadians hope to celebrate Christmas at work with their colleagues. However, no more than 17% of them are counting on an annual bonus. This is what a survey sponsored by H&R Block Canada found, conducted on-line in November among 1,503 people aged 18 years and older, by Léger Marketing.

And although companies don’t always gratify their employees with a year end bonus, a large majority of employees are aware that these financial boosts can have significant repercussions on their tax returns. Indeed, 72% of respondents realize that cash bonuses can be considered as taxable income

However, they are much less likely to be aware of the tax implications of a Christmas party. As evidence, only 10% of those surveyed knew that a party at work, or any other social activity organized by the employer, is considered as a taxable benefit by Revenue Canada, as soon as the expenses exceed $100 per person, excluding accommodation and transport costs. In this case, the cost per participant is listed on the employee’s T4 slip.

Taxable gifts

In respect of taxable benefits, Canadian tax authorities similarly register gifts and awards of over $500 that the employer might offer its employees. But 48% of those interviewed appear to be unaware that gift cards and other cash equivalents may be taxed. As Johan Girard, higher tax specialist at H&R Block Canada, reminds us, employees are not aware that hockey tickets or holiday stays are considered as taxable benefits. 59% of those surveyed did not know that a prize won by a drawing funded by the employer is punctured by Revenue Canada. In Quebec, 70% are unaware. This proportion is just as high among the residents of Ontario and the Maritimes, as well as among Canadians aged 18 to 24 years. It would be better therefore to refuse these gifts if they will not be used, otherwise their value will be listed on the tax slip and therefore taxed.

Finally, life insurance premiums paid by the company are in the same way a taxable benefit and therefore taxed. Private health care premiums are taxable but only in Quebec. It’s therefore imperative to have employees check how bonuses, gifts and insurance are recorded by the company’s pay department and how deductions are managed. It’s a precaution that will prevent shocks or seeing employees ending up with a tax debt at the end of the year.

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