Employee Benefits: Taxable, Or Not?

When it comes to payroll, employees usually trust their employer to correctly calculate and deduct source deductions, such as income tax and Employment Insurance (EI) and Canada Pension Plan (CPP) contributions, and to remit those deductions to the government on time. Sometimes employers make mistakes, such as neglecting to include the value of a taxable benefit when calculating source deductions.

The Canada Revenue Agency (CRA) expects employers to accurately report the value of taxable employment benefits for tax purposes. To do so, employers must first consider whether a fringe benefit is taxable, and, if so, determine its value and report it properly to taxing authorities. This is a significant requirement for an employer, as the misreporting of taxable benefits can affect not only its own liability for penalties and interest, but also its relationship with employees. An employer that fails to properly determine and report the value of taxable benefits may be