Giving Employees Holiday Bonuses

Written by:  Gwyneth James MBA, CPA, CGA

Ho Ho Holiday Bonuses! Don’t give out bonuses to your employees before reading this!

At this time of year, you may be wondering about the rules for giving your employees bonuses and gifts for Christmas or year-end.  The CRA has specific rules about giving employees gifts and bonuses that determine if they are taxable benefits to the employees.  A taxable benefit means that the employer must include the amount in the employee’s income and may have to deduct income tax, CPP or EI on the employee’s paystub.  The type of gift you are giving will determine if it is a taxable benefit to your employee or not and which deductions you will need to withhold.

This is the breakdown of the different types of gifts you can give your employees:

  • Cash Bonuses – If you are giving your employees a cash bonus on their pay cheque this is a taxable benefit to the employee.  You will need to deduct income tax, CPP and EI premiums on their paystub.
  • Gift Cards & Gift Certificates – If you want to give your employee a gift card or a gift certificate instead of cash the CRA still considers this a taxable benefit to the employee. You will need to deduct income tax and CPP on their paystub, but not EI premiums.
  • Non-Cash Gifts – Non-cash gifts can be given to an employee for a special occasion with a total fair market value (not the employer’s cost) of up to $500 annually, including HST, and it is not a taxable benefit to the employee. If the value of the gift or gifts is over $500, any amounts over $500 are a taxable benefit to the employee. An example of a non-cash gift would be tickets to an event for a specific date and time. Items of a trivial value like t-shirts, mugs, coffee or plaques do not have to be included in this calculation.

All of these gifts are deductible as expenses in your business’ bookkeeping.

Have a wonderful holiday season and a prosperous new year!

3 Things You Need To Do When Starting Up A Corporation

Written by:  Suzanne Cody CPA, CGA

As busy as you are when you are just getting things going, it is important to be mindful of Tax issues. There is a great deal of juggling going on with so many puzzle pieces to put together when setting up a newly formed corporation. If you want to avoid starting out on the wrong foot, handling basic tax matters should be in your crosshairs.

You may have started your business to earn a little extra income in addition to your day job like many others have done and now you have a full-time venture on your hands. You have made the decision to incorporate and now need to transfer your existing business to it. You should consider filing an election with the CRA to roll the assets and liabilities into the corporation to avoid unwanted personal tax liabilities. This will require you knowing the value of your current operations.

Get a new business number from the CRA. Upon incorporation you will need to request a business number for the corporation. You will also need to register for a GST account assuming your sales are over $30,000. Depending on whether you plan to have employees and how you plan to compensate yourself, you may also need to register for a payroll account.

You must choose your year-end date within the first twelve months of incorporating. This date does not need to coincide with the anniversary of your incorporation date not with the end of the calendar year. The ideal year-end should be based on your business cycles. For instance, if you are a retail store, you would want to choose a date occurring just after the end of your busy season. This would mean that there would be less inventory to be counted, not as many transactions in progress, and more time for administration work required to close your books.

If you would like further information, please call the office at 705-876-6011 or I can be contacted directly at

The Mystery of TD1 Forms Solved!

Written by:  Gwyneth James MBA CPA, CGA  Senior Partner

It’s your first day on the job and you’ve been handed a pile of paperwork to complete and sign plus the employee policy manual to read and a Health & Safety video to watch. In the midst of the chaos, you probably don’t understand – or care – what the significance of the TD1 forms are. But they are important and can cause big problems if they aren’t completed properly.

There’s even a penalty levied by CRA on employees who do not provide their employer with a completed TD1 form within seven days – $25 per day, minimum $100, maximum $2,500!

One of the purposes of the TD1 form is to inform the payroll department about the personal tax credits you usually claim on your tax return. If you are able to claim credits beyond the basic personal amount (examples are Family Caregiver Amount, eligible dependant, or disability tax credit), this form will allow your employer to deduct less tax at source. You will have more money in your hands throughout the year instead of having to wait for a refund the following spring.

Another purpose of the TD1 form is to instruct your employer to deduct additional tax each pay. This is useful if you have rental or investment income or are running a small business on the side. It will reduce the amount you have to pay in the spring when all your sources of income are added together, possibly pushing you into a higher tax bracket.

If you are working more than one job, be aware you can only claim the personal tax credits on one form. For the other employers, you will sign the TD1 form with a zero for the tax credits so every dollar you earn has tax withheld.

TD1 forms are in effect with your employer until you provide new ones, so be sure to complete an updated set if your tax situation changes.

Advocacy & Bill 148

Written by:  Gwyneth James MBA CPA, CGA  Senior Partner

The Peterborough Chamber of Commerce is a non-profit, membership-driven association that advocates on behalf of the Peterborough business community. Members of Chambers across Ontario, including yours truly, loudly and firmly stated their displeasure with one aspect of their government’s Bill 148 which introduced several updates to the Employment Standards Act.

That aspect was the public holiday pay formula – the method used by employers to compensate employees for time off (or worked) on statutory holidays. The new method looked only at the employee’s prior pay period and paid an average of the amount of that paycheque divided by the numbers of days worked in that period. That presented a huge issue for employers of part-time and casual employees because that individual now could receive as much as a full day’s pay for the holiday if they only worked one day in that prior pay period. Payroll costs for some businesses were skyrocketing and that had not been the government’s intention.

Several meetings, conference calls, letters and emails later, the Minister of Labour determined that this part of Bill 148 needed further review. It was announced that the method used to calculate statutory (or public) holiday pay would be rolled back to the old method for the period July 1 to December 31, 2018.

This means that the Victoria Day holiday was calculated using the new method, but Canada Day and subsequent statutory holidays will use the pre-2018 method of an average of pay over the previous four work weeks divided by 20.

Advocacy does work and it is ongoing by business organizations like the Chamber. Whether you add your voice through membership or not, submissions to the Ministry of Labour are encouraged to ensure that when the review period is completed, the method used to pay employees for statutory holidays is fair to all employees and employers.

For more information, please refer to this bulletin posted by the Ministry of Labour:  Click here 

Stay Compliant with CRA’s Payroll Deductions and Remittances

Written by:  Pam Hammett, Bookkeeper and Payroll Specialist

As responsible business owners, you have an obligation to remit your business taxes, whether it be income taxes, HST, or withholdings of employee Source Deductions to Canada Revenue Agency (CRA). This article will cover not only the importance of correctly deducting Payroll Source Deductions; but of remitting these withholdings by the required deadlines.

With payroll, all monies deducted on behalf of the CRA are considered to be held “in trust” for the Receiver General. Employers who remit withholdings or deductions late, withhold the statutory deductions but do not remit them, or fail to deduct the required deductions will be subject to penalties, which may increase on subsequent occurrences, plus interest charges.

These penalties can be quite substantial. The CRA’s Employers’ Guide to Payroll Deductions and Remittances breaks down, in detail a complete list of penalties, interest and possible consequences which will occur if Payroll Source deduction and withholdings are not prepared correctly and remitted on time.

In summary, penalties may include:

  • A failure to deduct can lead to a penalty assessed up to 10% of the amount of CPP, EI and income tax not deducted
  • A failure to remit amounts deducted or being late with a remittance the penalties are currently:
    • 3% if the amount is one to three days late
    • 5% if it is four or five days late
    • 7% if it is six or seven days late and
    • 10% if it is more than seven days late, or if no amount is remitted.

Note: These penalties are quoted from the CRA website as at January 2, 2018.

In addition to these penalties, the CRA may also charge you interest on the amounts due from the date the payment was due. Prescribed interest rates are set by the CRA and can be found by clicking here.

Further, if you are assessed and penalized by the CRA more than once in a calendar year, the CRA will apply higher penalties to the second or later failures to remit. Therefore, it’s imperative that you calculate deductions accurately, actually deduct and collect from your employee(s) pays and remit to the CRA on time.

In the worst-case scenario, should you not comply with the CRA in terms of payroll deductions, remitting and reporting requirements, the CRA can and may prosecute you resulting in fines up to $25,000 and/or imprisonment up to 12 months.

As you can see, failure to comply with the CRA Payroll Deduction and Remittance requirements can result in penalties and interest which add up exponentially and possible legal prosecution.

Your Chartered Professional Accountant can help with accurately calculating and deducting payroll deductions helping you stay compliant with the CRA.

Pamela Hammett
Bookkeeper and Payroll Specialist

Pamela Hammett has been a member of the Cody & James team since June 2016 and has over 20 years of accounting, bookkeeping and administration experience. Pam is actively working towards a certification as a Payroll Compliance Practitioner. Once certified, Pam will become Cody & James CPAs’ in-house Certified Payroll Specialist servicing the payroll needs of our clients.

1-888-511-2791
info@codyandjames.ca