CPR_JUNE_2013v7.qxp:Canadian Employer.qxd 13-05-27 11:50 AM Page 5
CANADIAN PAYROLL REPORTER
Gross taxable benefit a pensionable earning
Continued from page 4
amount is a pensionable earning.
This status does not change, if at the
time the taxable benefit is recognized, the person is no longer in an
employment relationship to the
employer concerned.
Further, it's the gross taxable
benefit that is pensionable. None of
the deductions above that reduce
taxable income are taken into
account for CPP purposes. In other
words, for the $50,000 benefit above,
CPP contributions are owing on the
full amount (up to the applicable YTD
maximums), not the net $25,000.
For employment insurance purposes, since they are non-cash, stock
option benefits are not insurable earnings and ROE reporting isn't required.
In practice, it's not clear what the
CRA expects when stock option benefits are provided to former employees
and there are no other earnings from
which to make the necessary source
deductions. Prior to the 2010 budget
change, the CRA accepted that
employers were not required to withhold and remit when the only employment income were taxable benefits.
It's not clear how this 2010 budget
change affected that CRA administrative position.
Stock option taxable benefits are
T4 reportable, even for benefits that
are income taxable in years where
otherwise there is no employment
relationship. This means the gross
amount of any stock option benefits
must always be reported in T4 Boxes
14 and 26, even for former employees.
If no CPP source deductions are
taken, and no corresponding employer contributions are reported on the
T4 Summary, presumably a PIER
report would show both sides of these
CPP contributions as owing.
Alan McEwen is a payroll consultant
and freelance writer. He can be reached
at armcewen@cogeco.ca, (905) 401-4052
or visit www.alanrmcewen.com.
■ ONLINE BONUS
Payroll blog
You can read Alan McEwen's payroll
blog weekly on Canadian Payroll
Reporter's website.
McEwen, an experienced payroll consultant and freelance writer, offers his
unique take on all aspects of payroll.
His most recent entries have included
articles on:
•when stock options are not stock
options
•how separation payments influence
employees on maternity or EI leave
•penalties for non-compliance
•paying the tax on prizes
•risks of treating employees as selfemployed contractors
For more information, visit
www.payroll-reporter.com.
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