Sick Day? Parental Leave? Retirement? What Employers Need to Know

Sick Day? Parental Leave? Retirement? What Employers Need to Know

Payroll is rarely straightforward; practitioners who administer payroll are consistently responsible for managing employees’ pay that falls outside the norm of the payroll cycle. Special payments cover a whole host of payment exceptions including employee bonuses, severance pay, workers’ compensation top-ups, and death and retirement benefits, to name a few. Also included are payments that cover employees when they’re away from the office for planned or un-planned absences like vacation, sickness and parental leave.

How can employers help payroll and HR manage the volume and complexity of special payments? By encouraging payroll and HR practitioners to undertake ongoing professional development, employers can be assured that their staff will have the knowledge, tools and resources needed to confidently handle special payments and properly administer the Record of Employment (ROE) on behalf of employees. The Canadian Payroll Association’s Special Payments & Completing the ROE seminar, offered across Canada throughout the year, arms payroll and HR practitioners with the knowledge to understand what special payments are and when they apply, provides a thorough block-by-block walkthrough of the ROE, and supplies an ROE Checklist to enable practitioners to confidently and correctly administer the form.

Payroll Implications for Special Payment Situations

When it comes to special payments, every organization is unique. The administration of special payments within an organization will depend on numerous factors including federal and provincial legislation, employer procedure and policy, and employee behavior and circumstances.

Is an employee retiring and eligible for a retiring allowance? Did an employee exceed expectations and is now eligible for a bonus or commissions? Is a staff member taking parental leave and will they receive a special top-up payment under company policy? Knowing how to handle these special payments and the ROE is crucial.

Navigating so many factors relies on cooperation and knowledge-sharing between management, human resources and payroll. In many smaller organizations, where the HR and payroll function are handled by a single party, practitioners must consider the implications of special payments from a payroll perspective while managing the employee’s ROE. For industries with high-turnover environments, such as retail or hospitality, managing the ROE and affiliated special payments are a major responsibility for both HR and payroll. Ultimately, it is important for employers to acknowledge the complexity behind special payments to more fully understand what entitlements may affect your employees or your bottom line.

Record of Employment Doesn’t Have to Be a Pain

Because the ROE is a mandatory form required by the government after an employee experiences an interruption of earnings, payroll and HR practitioners must properly navigate the complexity of the ROE form to ensure that they are remaining compliant. Practitioners are legislatively required to issue the ROE five days after the employee’s final pay period. The Government of Canada states that the ROE is “the single most important document used by employees in establishing a claim for Employment Insurance (EI) benefits.”  Despite the importance placed on this form, the Canadian Payroll Association’s 2014 Member Census revealed that the ROE remains a pain point for many payroll practitioners who are struggling to keep abreast of changing and complex federal and provincial legislation and growing workload demands.

“Employers should be aware how the changing regulatory landscape and changing employee circumstances place operational challenges on payroll and HR pertaining to special payments and the ROE,” said Janet Spence, Manager of Compliance Services and Programs at the Canadian Payroll Association. “It is in the best interest of employers to encourage their payroll and HR staff to continue their professional development on these topics to ensure ongoing compliance.”

The CPA’s Special Payments & Completing the ROE seminar is one of more than 20 different topics covered by the Association’sProfessional Development Seminars. These seminars, available across Canada for members and non-members in payroll, accounting, finance and human resources, provide vital knowledge to support payroll compliance. For a complete listing of seminar dates and for more information on the Canadian Payroll Association’s Professional Development Seminars, Certification Programs and Benefits of Membership, visit payroll.ca / paie.ca.

About the Canadian Payroll Association:
Canada’s 1.5 million employers rely on payroll practitioners to ensure the timely and accurate annual payment of $901 billion in wages and taxable benefits, $305 billion in statutory remittances to the federal and provincial governments, and $169 billion in health and retirement benefits, while complying with more than 200 federal and provincial regulatory requirements. Since 1978, the Canadian Payroll Association has annually influenced the payroll compliance practices and processes of over 500,000 organizational payrolls. As the authoritative source of Canadian payroll compliance knowledge, the Canadian Payroll Association promotes payroll compliance through education and advocacy.

SOURCE Canadian Payroll Association

Two brothers get 51 months in prison for $11-million tax fraud

KEITH FRASER

Two Vancouver-area brothers have been sentenced to 51 months in prison each after committing an $11-million tax fraud.

In December, following a three-week trial, B.C. Supreme Court Justice Elliott Myers found Fareed Mohammed Raza, 42, and Saheem Mohammed Raza, 35, each guilty of one count of fraud over $5,000.

As tax preparers, the brothers issued false donation receipts to 781 clients in the amount of $11 million in exchange for cash donations not passed on to a Bangladesh charity. The clients filed income tax returns in which they used the false donation receipts to claim deductions for which they were not entitled, to avoid paying $4.9 million in taxes.

The fraud occurred from December 2002 to June 2011. After the Canada Revenue Agency launched an investigation, most of the taxes avoided were collected from the clients.

In imposing sentence Tuesday, the judge noted he had found that the fraud was on an “industrial scale,” and spoke of the need to deter and denounce such crimes.

The prosecution argued that an aggravating factor was the number of victims, but the judge said he couldn’t say the clients were victims because they had to have known they were getting receipts for more than the actual donation, and he concluded: “The only true victim was the Crown.”

The defence argued that the culpability of the taxpayers ought to be a mitigating factor on sentencing for the brothers, but the judge rejected that submission.

“I cannot see that this has any effect on the accused’s moral culpability,” said the judge. “It is not a situation of the more the merrier. Put a different way, culpability is not a finite quantity that is to be divided between the number of the accused who participate in the scheme.”

The brothers had little reaction to the sentencing. Fareed Raza, who is married with one child, had immigrated to Canada from Fiji in 1997 and became a Canadian citizen in 2001. He had no prior criminal record.

The Crown had sought a sentence of five years in prison for the brothers while the defence argued for three to four years of jail. The offence carries a maximum penalty of 14 years in prison. The Crown asked for the brothers to be fined $570,000 each, but the judge declined to impose that penalty.

Faiz Khan, a nephew of the brothers, was convicted of attempted fraud under $5,000 but received a conditional discharge because the judge found that he had played only a minor role in the scheme.

Source: Vancouver Sun

Cross-Border Insurance Coverage – Don’t Miss April 30 Deadline for 10% Excise Tax

Cross-Border Insurance Coverage – Don’t Miss April 30 Deadline for 10% Excise Tax

Canadian Tax Adviser | KPMG

Some businesses are required to pay, by April 30, 2016, a federal tax of 10% of net premiums paid or payable if they’ve purchased insurance coverage outside Canada or were covered under a global insurance policy acquired by a parent company in 2015. Generally, the federal tax applies where the business or individual purchases coverage for risks in Canada directly, or where the coverage is obtained on their behalf by a third party. This tax could also apply where a business has insurance coverage with an insurer licensed in Canada but the broker or agent is outside Canada

These businesses and individuals may also be required to self-assess provincial taxes and levies on cross-border insurance coverage or multi-provincial insurance coverage. These provincial taxes and levies have specific rules and deadlines that are different from the ones that apply for the 10% federal tax.

April 30 deadline for 10% federal tax

The Excise Tax Act  requires a person resident in Canada, who enters into an insurance contract (or on whose behalf such a contract is entered into) against risk within Canada with an insurer that is not authorized under the laws of Canada or any province to transact the business of insurance, to pay a 10% tax on the net premiums paid or payable during the preceding calendar year. This rule also apply to a non-resident corporation carrying on business in Canada. For example, a corporation in Canada may be liable to pay the tax where the parent company acquired global insurance outside of Canada on behalf of the entire corporate group. Affected taxpayers must remit the 10% tax to the CRA by April 30

A business may also be required to self-assess the 10% tax on insurance premiums related to an insurance contract that is entered (or entered into on its behalf) through a broker or agent outside Canada with an insurer in Canada.

In general, the 10% federal tax does not apply to certain types of insurance, such as life, sickness or personal accident insurance and insurance against marine risks. The law also provides relief in some cases where a business can clearly demonstrate that the insurance is effectively not available in Canada. To qualify for this exemption, the business must file an exemption application with the CRA and provide specific information and supporting documentation.

Don’t forget provincial sales tax and insurance premium taxes

Buying insurance coverage from insurers not registered in a particular province may also lead to provincial tax liabilities for some businesses.

Three provinces currently apply a sales tax on certain insurance contracts (Quebec, Ontario and Manitoba). Similar to the federal rules, a business that enters into contracts with insurers not registered in the province may be required to self-assess a provincial sales tax on the related insurance premiums. The sales tax rates, remittance deadlines and related non-compliance penalties vary by province.

A business may also be liable to pay insurance premium taxes as the insured person where the coverage is in a territory or a province in which the insurer is not licensed (otherwise, the insurer is generally liable for these taxes). In some cases, the business may be required to pay an increased levy on some of these premiums. For example, Alberta imposes a levy of up to 50% of the premiums and up to 75% if the tax is paid late. Again, the insurance premium tax rates, rules and remittance deadlines vary by province and may be different than the ones for provincial sales taxes.

For more information, contact your KPMG adviser.

Great Tax-pectations: Canadians anticipate substantial refunds in 2016

Great Tax-pectations: Canadians anticipate substantial refunds in 2016

With tax season quickly approaching, the majority of Canadians have great tax-pectations, with nearly six in 10 (57 per cent) saying they expect to receive a tax refund this year, according to a recent TD survey. Of those anticipating a refund, 61 per cent expect to receive up to $1,499. While it can be tempting to view a tax refund as extra money for instant gratification, a tax refund can have a greater impact when it’s incorporated into a broader financial plan.

“There are many ways to use your tax refund based on the priorities you face in your life stage , like getting ready to buy a home, planning to expand your family or saving for retirement,” said Linda MacKay, Senior Vice President, Personal Savings and Investing, TD Canada Trust. “While you can spread it across several different financial priorities, you can also consider allocating the full sum towards one or two goals to fully maximize the returns’ potential.”

The TD survey revealed that the top three financial goals for Canadians include paying off credit card debt (32 per cent), contributing to an RRSP or TFSA (31 per cent), and adding to their emergency fund (28 per cent).

MacKay says that setting personal short and long-term financial goals can help Canadians decide the best course of action for allocating their tax refund. Taking these goals in context with key lifestyle priorities over the next three, five and 10 years, like starting a family or looking for a new job, can help bring clarity to where a tax return will leave the biggest impression on an individual’s unique financial situation.

For those using life stages to help determine where to allocate their refund, MacKay offers the following tips:

Tax Refund Guide for Every Life Stage

  1. The Graduate
    • Consider a lump sum payment on student loans or credit card debt.
    • Starting a new job? Contribute to a high interest savings account to help cover the cost of your first vacation away from the office.
  2. The Go – Getter
    • Does your employer offer an RSP matching contribution program? If so, allocate as much of your refund as it takes to maximize your employer’s contributions.
    • Invest your return towards a professional development course to further your career.
    • Maximize the potential of your peak earning years. Work with a financial advisor to grow your portfolio through a range of products like mutual funds, GICs and term deposits.
  3. The Property Pursuer
    • Whether you’re a first-time buyer or looking to invest in a family cottage, use your refund to build a larger down payment on your dream property.
    • Already a homeowner? Consider a lump payment against your mortgage. Even an extra $1500 can save substantial interest over the lifetime of a mortgage.
    • Either way, contributing to a TFSA to save for unexpected housing costs like roof repairs or plumbing issues is never a bad idea.
  4. The Full House
    • Contribute to your child’s RESP, taking advantage of compound interest and government matching grant programs that may be available to you.
    • Make planning for an upcoming parental leave less financially stressful by contributing your refund to a high interest savings account.
  5. Golden Years Goal-Setter
    • Get a head start on 2016 and make a contribution to your RRSP. The amount contributed can also be claimed as a tax deduction on next year’s tax return stretching the dollars even further.
    • Consider how you want to spend your retirement years – if it’s mastering a new skill or pursuing a new hobby, put money aside now to fund those activities later.
  6. Starting a New Chapter
    • If an exciting new direction like remarriage or a career change is on the horizon, make a deposit in a high interest savings account or TFSA to provide an additional financial buffer.

MacKay adds that many Canadians, regardless of life stage, have multiple financial priorities that often compete – for example, saving for the future and paying down debt.

“If you’re feeling overwhelmed and need guidance on the best way to use your tax refund, visit your local TD branch,” said MacKay. “We can help you make informed decisions about your financial reality to maximize your tax refund’s potential to help you achieve your financial goals.”

About the TD Bank Group Poll
TD Bank Group commissioned Environics Research Group to conduct a custom survey of 6,337 Canadians aged 18 and older. Responses were collected between February 25 and March 17, 2016. Canadians and a subgroup of Canadians who expect to receive a tax refund are included in this report.

About TD Canada Trust
TD Canada Trust offers personal and business banking to more than 11.5 million customers. We provide a wide range of products and services from chequing and savings accounts, to credit cards, mortgages and business banking, plus credit protection and credit travel medical insurance, as well as advice on managing everyday finances. TD Canada Trust makes banking comfortable with award-winning service and convenience through 24/7 mobile, internet, telephone and ATM banking, as well as at over 1,100 branches, with convenient hours to serve customers better. For more information, please visit: www.tdcanadatrust.com. TD Canada Trust is the Canadian retail bank of TD Bank Group, the sixth largest bank in North America.

SOURCE TD Bank Group

Earn extra income this year through Uber or Airbnb? Remember to report it

By Craig Wong

THE CANADIAN PRESS

OTTAWA _ People who drove for a ride-hailing service like Uber or rented out their homes through Airbnb last year earned extra income, and that needs to be reported come tax time.

“When you decide to put up the post for a room in your house or your cottage or in fact if you happen to sign up with Uber and be a driver, you’ve got I think an approach to earn income or money,” said Paul Woolford, a tax partner at KPMG.

“As such, there’s a need to report the benefits of those efforts.”

But some costs that were paid to earn the extra cash can be used to offset income and reduce taxes owing.

“In a simple context, anything that you incurred to provide that income … you can take an expense for the related cost,” Woolford said.

The complication comes in the shared aspect.

“There’s property taxes that apply to both personally and the room, there’s heat and electricity, there’s water costs, there’s potentially repairs,” Woolford said.

For example, people who rent out their cottage for one month of the year can take one 12th of the property taxes, insurance, and heating-cooling costs and expense those against the income they receive.

The profit is then rental income that must be reported on a tax return.

For those who worked as a driver for Uber, that means having kept logs detailing how much they used their cars for personal use and when they drove paying passengers to determine how much may be deducted.

“Record keeping becomes very important,” Woolford said.

Earlier this year, Airbnb agreed to email the 11,000 people in Ontario who list their homes or other spaces for rent on its site and tell them to report the income as part of a pilot project with the province.

Dale Barrett, a tax lawyer and principal at Barrett Tax Law, said he was unaware of any instances of the Canada Revenue Agency requesting information from companies like Uber or Airbnb so far.

“However, at any given time this could happen,” he said. “If these companies are American, the information could go from the American company to the IRS, from the IRS to CRA, then all of sudden they’ll know who all the Canadian players are and they can go ahead and reassess.”

Barrett noted that several years ago the agency launched a probe reviewing big eBay sellers and obtained information on its so-called PowerSellers.

“If you’re doing business with one of these sort of new economy-type of websites and you’re earning income, one way or another, the CRA will eventually find out,” he said.

“And if you haven’t declared it, you’re going to be subject to penalties and if the amount is great enough, prosecution.”

canada-press

Here are 5 things to know when filing income tax returns this year:

The Canadian Press

OTTAWA — Five things to know when filing income tax returns this year:

Deadline: The deadline for most Canadians to file their income tax return is normally April 30, but because that falls on a Saturday this year, the Canada Revenue Agency will consider it on time if returns are submitted by May 2. If you or your spouse or common-law partner were self-employed last year, you have until June 15 to file. But if you owe money, you must still pay it by May 2.

Always file a return: Even people who have no income or only made a small amount last year and don’t owe any tax should file an income tax return. They may be eligible for a refund or other benefits such as the goods and services tax/harmonized sales tax credit.

New this year: The Canada Revenue Agency is making it easier this year to prepare income tax returns. People are allowed to use a new auto-fill service to fill in tax information for 2015, depending on the software they use.

Changes: Were there any big changes in your life in 2015? Did you get married, have a child or maybe move across the country to take a new job? These could mean changes in your income tax return this year.

Need help?: People don’t need to pay an accountant for help doing their tax returns. The Community Volunteer Income Tax Program has been helping Canadians with modest income and a simple tax situation prepare their tax returns for more than 40 years.

canada-press

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