Professional development: it pays to know.

• Author: S., Teresa
• Position: CORPORATE PROFILE

CPA plain language seminars are the most efficient and effective way to stay current, ensure compliance and reduce the risk of audits and penalties.

Three Costly Payroll Mistakes and How to Avoid Them

Payroll accuracy and compliance is the goal of every payroll professional, but accuracy can be difficult to achieve without assistance. To help payroll practitioners, the Canadian Payroll Association, the authoritative source of Canadian payroll compliance knowledge, has compiled a list of three common payroll mistakes with tips to ensure your payroll is in compliance with the federal Income Tax Act, as well as the Taxation Act in Quebec.

Three of the most common payroll mistakes made by organizations include miscalculating taxable employment income by omitting amounts such as bonuses, subsidized housing, and paid personal living expenses, neglecting to report taxable employment benefits in the period to which they relate, and failing to remit source deductions on time.

Miscalculating taxable employment income

Many employers do not report personal and living expenses paid for by the employer as taxable employment income. However, unless the employee falls under a specific exemption, these amounts are considered taxable income.

In addition, where an employee is provided free or subsidized housing, there is a taxable benefit to the employee equal to the fair market value (FMV) less any amount charged to the employee.

Another area worthy of attention is regarding amounts other than base salary. Amounts such as bonuses, commissions, tips or gratuities, vacation pay, certain honorariums and flat-rate vehicle allowances must be included as part of the employee's taxable employment income.

Reporting taxable benefits only at the end of the year

Use caution when assessing taxable benefits, such as employer-provided life insurance. Schedule the applicable source deduction remittances according to the appropriate payroll schedule, and be absolutely certain that you are calculating the actual value of the benefit, including any related taxes.

Otherwise, the employee may face income tax...