Canadian Payroll Reporter

CANADIAN PAYROLL REPORTER 7 Canadian HR Reporter, a Thomson Reuters business 2014 ASK AN EXPERT ANNIE CHONG Reimbursing employees for spousal travel QUESTION: Next month, our employ- er is hosting a meeting out of the country for key clients. Some em- ployees will be taking their spouses with them. If employees submit travel expenses to be reimbursed for the cost of their spouse accom- panying them, is the reimbursement a taxable benefit to the employee? ANSWER: The answer depends on whether the employer asked the em- ployees to bring the spouses and, if so, whether the spouses were spending most of their time on company business while on the trip. If so, the reimburse- ment would not be a taxable benefit. If, however, the employees brought their spouses on their own and the spouses were not taking part in business func- tions for the employer, the reimburse- ment would be a taxable benefit. A cash reimbursement of the tax- able benefit is subject to C/QPP con- tributions, EI and QPIP premiums and income tax deductions. A non-cash reimbursement is not subject to EI or QPIP premiums. At year-end, report the benefit in box 14 and in the "Other In- formation" area using code 40 on a T4. For Quebec, report the benefit in boxes A and L on an RL-1. Loan that exceeds a workers' compensation award QUESTION: We provided a no-interest loan to an employee while he await- ed a workers' compensation claim decision. The workers' compensa- tion body approved his claim, but the amount they awarded him was less than the amount of the loan. Are there any payroll consequences as a result? ANSWER:The CRA and Revenu Québec consider the excess amount (the amount of the loan that is higher than the claim award) to be employment income in the year the workers' compensation body paid the claim. Since it is employment income, it is subject to C/QPP contribu- tions, EI premiums, QPIP premiums and income tax deductions. You must also report it on the employee's T4 and RL-1 slips as employment income. The CRA and Revenu Québec do not consider the rest of the loan to be em- ployment income if the workers' com- pensation body accepts the employee's claim and the employee repays the loan. Since it is not employment income, no source deductions or T4 and RL-1 re- porting is required. If the employee failed to repay the loan, the loan would then be employ- ment income subject to source deduc- tions and T4 and RL-1 reporting. Annie Chong is the manager of the payroll consulting group at Carswell, a Thomson Reuters business. there is a much larger number of work- ers without bank accounts. A 2011 sur- vey by the Federal Deposit Insurance Corporation in the U.S. found 28.3 per cent of Americans either did not have a bank account or had very limited access to a bank. David McIninch, vice-president of marketing at ADP Canada, says, "over 90 per cent of Canadians have a bank account with the big financial institu- tions in Canada and what we see is over 90 per cent of our client base is paid via direct deposit." The types of businesses that may be most interested in payroll cards here are small businesses and those with tran- sient or seasonal workforces, he says. "In Alberta in the oil patch, there may be an opportunity where a job is complete and they want to pay them on the spot." While Gilbert agrees that employers with transient workers would find ben- efit in the cards, he says payroll cards offer advantages to all types of employ- ers. His clients include small employers and large ones. He says they like the cards because of the benefits they offer for reducing paper, lowering costs and dealing with employees. "The employer has reduced costs be- cause you are only paying for the cards once. You are not paying for cheques over and over," he says. "Also, if you have different things like bonuses or if you have people who are no longer em- ployed (who) are going to get severance, they don't have to come back to the of- fice. They don't have to line up." He adds that the cards also offer ben- efits for employees even if they have a bank account. "A lot of people have concerns with regards to using their normal Visa card on the Internet or for travel. In many cases, (the payroll card) gives them the opportunity to use a card that may have less money on it" than a credit card, says Gilbert. Looking ahead, MacKay says he ex- pects payroll cards will continue to be much less common than direct deposit for paying employees in Canada. But there could be a future for the cards here if employers think beyond using them solely for payroll. "Most people think about loading your payroll onto the cards, but they actually have a lot more utility than just payroll. You can put on rewards for people," MacKay says. "There could be expenses that you put on it if you want to preload expenses for somebody going on a trip." Americans less likely than Canadians to have bank accounts Continued from page 5 "Over 90 per cent of our (Canadian) client base is paid via direct deposit."

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