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Several changes occur on July 1 for vigilant taxpayers and payroll departments: The Federal TD1 Personal Tax Credit Return has been updated to include the new deduction rates for living in a prescribed northern zone, increased to $8.25 per day (single) and $16.50 per day (living with a dependant). Please see the revised TD1 form to adjust source deductions for persons meeting this criteria. Provincial Personal Tax Credits. Please note that increased personal tax credits and income levels have been tabled for Alberta and Saskatchewan for the Disability Tax Credit, Caregiver Amount and Amount for infirm dependant over 18. Check out the following link for the revised TD1 forms effective July 1: (AB and SK). Also, effective July 1, BC and NL have reduced their provincal tax rates. Check out the details at the following links: BC Budget 2008 NL Budget 2008 With an average refund of $1,400 last year, many Canadians overpay their taxes every month, at the expense of savings in tax deferred vehicles like RRSPs or non-registered accounts. Assuming 4.5% interest rates, this costs Canadians plenty over an average working life of 40 years. Consider the following, calculated on the assumption an average refund of $1,400 is reinvested each year for 40 years: Lost savings in RRSP: $208,000 (with re-investing additional refunds @ 35% MTR from contributions) Lost savings in non-registered account: $106,000 (after paying tax on earnings @ 35% MTR) Lost non-deductible interest savings on an average principal residence mortgage (6% rate) on which $1,400 was invested each year for 20 years: $37,000
Contributions to an RRSP by an employee can be made in two ways. He or she can fund the RRSP contribution from the after-tax take-home pay he or she receives. In this case, the employer has no involvement in the amount the employee contributes and the contribution has no effect on the employer's obligation to withhold income tax from the employee's net pay. It is not uncommon, however, for the employer to make the RRSP contribution directly to the employee's RRSP on his or her behalf. The employer may have established a group RRSP for its employees collectively, for example, or the employee may have directed the employer to withhold and remit a portion of the employee's wages directly to an RRSP. Where the employer funds the RRSP contribution directly, the employer can take the amount of the contribution into account in determining the amount of income tax to be withheld from the employee's net pay. In this event, however, the CRA requires that the employer have "reasonable grounds" to believe that the RRSP contribution will be deductible to the employee involved (remember that RRSP deduction room is based on the employee's overall earned income, not just employment income.) CRA suggests that an employer will have reasonable grounds where the employee has provided an assurance or, better yet, a copy of his or her RRSP deduction limit statement, which accompanies each year's Notice of Assessment. The RRSP contribution is deducted from net pay otherwise determined in the same way that union dues and employee pension plan contributions are. Excerpted from Advanced Payroll for Professional Bookkeepers, one of the courses that comprise the DFA, Certified Bookkeeping Specialist designation program.
As with other employees, drivers must meet all the following criteria in order to claim travel expenses: They must be normally required to work away from your employerís place of business or in different places. Under their contract of employment, they must be required to pay their own travelling expenses. They must not receive a non-taxable allowance for travelling expenses. They must have a copy of Form T2200, Declaration of Conditions of Employment, completed and signed by their employer. In addition, in order to claim food and beverage expenses they must be away for at least 12 consecutive hours from the municipality and the metropolitan area where they normally report for work (home terminal). Generally the claim for food and beverage expenses is limited to 50% of the actual amount spent. Claiming Using the Simplified Method Drivers who work for employers who are in the business of transporting goods or passengere may use form TL2 Claim for Meals and Lodging Expenses and my use the simplified method for calculating their food and beverage expenses. Employees whose main job function is the transport of goods or passengers may also claim using the simplified method even if their employer is not in the business of transporting goods or passengers, so long as they meet the criteria listed above. Under the simplified method, employees are not required to claim their actual expenses but may, instead, claim a fixed amount per meal. For 2007, the fixed amount was $17 per meal. The employee is still required to keep a log book which details the travel and meals purchased. Alternatively, the employee may claim for the actual amount spent (detailed method) if they maintain the receipts for meals to back up their claim. Under either the simplified or detailed method, there are limits on the maximum numbers of meals that may be claimed. CRA will allow a claim for one meal after every four hours starting at the time of departure. A maximum of three meals per 24-hour period (again starting at departure time) may be claimed. Where the employee is normally required to be away from his or her home terminal but is sometimes scheduled for a trip lasting 10 hours or less, the maximum claim allowed is for one meal. Employees regularly scheduled on trips lasting 10 hours or less do not meet the criteria listed above for claiming meals. Alternatively, members of work crews, who purchase groceries and prepare their own meals (either individually or as a crew) may claim using the batching method, which allows a maximum claim of $34 per day. With the exception of long-haul drivers (see below), the calculated claim for meals (under any of the three methods) is multiplied by 50% to calculate the allowable deduction. Special Rules for Long-haul Truck Drivers A long-haul truck driver is an employee whose main duty of employment is the transportation of goods by way of driving a long-haul truck. A long-haul truck is a truck or tractor that is designed for, and primarily used for, hauling freight, and has a gross vehicle weight rating of more than 11,788 kg. For trips after March 18, 2007, long-haul drivers on eligible runs are allowed to deduct 60% of their meal expenses (rather than the 50% limit for other claims). An eligible run for this claim is a trip of at least 160 km from the home terminal and that requires the driver to be away from the home terminal for at least 24 hours. Thus, a long-haul truck driver that is scheduled on a shorter run is not allowed the additional 10% claim. The 60% limitation will be raised by 5% each year until 2011 when it will be capped at 80%.
The Canada Revenue Agency has announced the prescribed annual interest rates that will apply to any amounts owed to the CRA and to any amounts the CRA owes to individuals and corporations. These rates are calculated quarterly in accordance with applicable legislation and will be in effect from July1, 2008, to September 30, 2008. Income tax The interest rate charged on overdue taxes, Canada Pension Plan contributions, and Employment Insurance Premiums will be 7%. The interest rate paid on overpayments will be 5%. The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans will be 3%. Each of these rates represents a 1% drop from the rates in effect for the last two quarters. Other taxes The interest rate on overdue and overpaid remittances for the following taxes will be: Tax and Duty Overdue remittances Overpaid remittances GST 7% 5% HST 7% 5% Air Travellers Security Charge 7% 5% Excise Tax (non GST) 7% 5% Excise Duty (except Brewer Licensees) 7% 5% Excise Duty (Brewer Licensees) 5% N/A Softwood Lumber Products Export Charge 7% 5%
Canada Pension Plan (CPP) The Canada Pension Plan is a mandatory contributory, earnings-related social insurance program. It provides some protection to contributors and their families against the loss of income due to retirement, disability and death by providing a pension. CPP must be deducted from an employee's earnings if that employee: is 18 years or older, but younger than 70, is in pensionable employment during the year, and does not receive a CPP retirement or disability pension. Each employer is also required to contribute the same amount of CPP that is deducted from their employees pay. Most, but not all, earnings are pensionable. Some examples of earnings not subject to CPP contributions would include: pension payments, death benefits and payments made after an employee dies, except for amounts the employee earned and was owed before the date of death. Employment Insurance (EI) Employment Insurance is a social program that provides assistance to workers who lose their jobs. It also provides maternity, parental, and sickness benefits for employees who are unable to work temporarily. Participation is mandatory for all employees who qualify and for their employers. Like CPP, most earnings are subject to EI deductions ñ these are known as insurable earnings. Employers are required to contribute at a rate of 140% of the employee contribution to employment insurance. That is, for each $1.00 that is deducted from the employee's paycheque for EI premiums, the employer must remit $2.40. There is one very important area to be aware of here though. Earnings of an employee whose conditions of employment are not those of an ìarms lengthî employee are not insurable. It is always a question of fact as to whether an employee's conditions of employment meet this test. Generally, the issue is only important whenever the employee is related to the employer in some way. Related persons are individuals connected by blood relationship, marriage, common-law relationship, or adoption. Where the employer is a corporation, the employee will be related to the corporation when the employee is related to a person who either controls the corporation or is a member of a related group that controls the corporation. If such an employee enjoys employment conditions that an arm's length employee would not ñ unreasonably high or low pay, irregular working hours, no formal responsibilities, etc. ñ the employment is not insurable. In addition, the employment of a person who is employed by a corporation and who controls more than 40% of the voting shares is not insurable. Excerpted from Advanced Payroll for Professional Bookkeepers, one of the courses that comprise the DFA, Certified Bookkeeping Specialist designation program.