Tax Preparation Grande Prairie and Tax Preparation Budgeting
Tax Preparation Grande Prairie and Tax Preparation Budgeting- Taxable Income

Taxable Income

My name is Jocelyn Ruston, I am the owner and operator of Cover Your Assets Books and Taxes in Sexsmith Alberta. We are a family-owned and operated bookkeeping and tax preparation firm. While we have clients across Canada, we focus on businesses and individuals in the Grande Prairie Area. Today I wanted to talk a little bit about taxable income. I know that taxable income is a bit of a sore subject as of late, especially where the previous CERB was concerned. What many people do not know is that there are many more instances of taxable income. Sources that many people do not consider or think about. They may not consider it because it does not impact them, but knowledge is power, so let us start empowering our clients for tax preparation grande prairie and tax preparation budgeting services.

Taxable income is defined as the value of what you have received in income and benefits of employment according to the CRA. The most common taxable income is going to be wages or salary earned. This is where the employee gets an economic benefit from the employer in monetary value. Perhaps the person has engaged in business. Any income earned from business in any way is also taxable income. There are several types of taxable income that don't always come in the form of cash in hand. These are known as taxable benefits. So lets look at the types of income and benefits that are considered taxable income for tax purposes.

Tax Preparation Grande Prairie and Tax Preparation Budgeting Grande Prairie
Tax Preparation Grande Prairie and Tax Preparation Budgeting Grande Prairie

1) Employment income- money received from an employer for doing a job

2) Self Employment Income- Money received for doing a job, or providing a service, or providing a product.

3) TFSAs and RRSPs- Investment income earned in a TFSA can be sheltered as long as the taxpayer doesn't exceed the contribution limit. Funds withdrawn are not taxable upon extraction. Deposits into RRSPs result in reductions to taxable income. Withdrawals from RRSPs are fully included as taxable income.

4) "Other" income- This is a broad category and includes money from bursaries, scholarships, and fellowships. This also includes retiring allowances, pensions, and deferred profit-sharing plans. Also, lawsuits may fall under this category as well. If you won a lawsuit for lost wages for example this may be considered taxable income.

Now that we have covered taxable income that involves cash, let's list taxable benefits. These benefits are considered "income" in a broad sense. Taxable benefits are defined as any benefit you receive, and/or have benefit of, through employment. These benefits are treated like income as you are still required to pay tax on them as you would income.

1) Tips- Tips received through waitressing, bartending, delivery driving etc. Tips are considered taxable benefits.

2) Boarding, Lodging, rent-free or low-rent housing- This is considered a taxable benefit. As room and board, or low rent or no rent is a benefit to the employee it is considered a taxable benefit.

3) Personal use of a company or employer vehicle- Once again as this is a direct benefit to the employee it is considered a taxable benefit. While I know many companies that don't actually enforce or calculate this, legally they should be.

4) Gifts, awards, and rewards valued over $500 per year- Any gift, award or reward be it cash or items valued over $500 given to an employee is considered a taxable benefit. This includes stocks, securities, gift certificates, gift cards, vouchers and tickets, bonuses, etc.

5) Use of company property for vacation purposes- Yep once again personal gain and benefit is derived from this so it is considered a taxable benefit.

6) Life Insurance Premiums- Premiums paid by your employer for life insurance are a taxable benefit.

7) Reimbursement for the cost of tools used for employment- Since the employer reimbursed the cost of these tools, and the employee has the continued benefit and use of the tools, this is a taxable benefit.

8) Scholarships provided to children of employees- Yep, even scholarships for your children are considered a taxable benefit.

As you can see there is alot of "taxable benefits" that can get you come tax time. Because the employee receives the benefit that it is treated as "taxable income". Now where your employer is concerned this is taken care of on their end and is reported on your T4. So while it shouldnt pose any further "problems" for you come tax time, it is always good to be armed with the knowledge. Knowing what is and isn't taxable income and benefits and what could impact your earnings.

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