Ask an accountant: ‘Tis the season for gift-giving

Francesca Giroux, CGA
For the Lakeside Leader

Ever wonder how much can be spent on a gift or a long-service award for an employee without out having to include it on their T4? To start, it should be noted that a gift has to be given for a special occasion such as a wedding, religious holiday or a birthday, and an award must be given for an employment related accomplishment such as long or outstanding service (an award cannot be performance related). Cash and near cash gifts and awards (i.e. gift certificates and gift cards) are always considered to be a taxable benefit to the employee. It is the non cash gifts and awards that may not be considered a taxable benefit in certain circumstances.

In addition, if the total fair market value of all gifts and awards is less than $500 the gifts and awards are non taxable. If the fair market value exceeds $500, then the taxable benefit is calculated by subtracting $500 from the total fair market value. For long-service awards, if the award is in recognition of service of at least five years, and a long-service award has not been received in the previous five years, then there is a separate $500 non taxable limit. If the fair market value of the award exceeds $500, the amount in excess of the limit is considered to be a taxable benefit.

Remember that if a gift is taxable, CPP contributions and income tax should be deducted. If the gift is paid in cash EI premiums should be deducted as well. Non-cash gifts that are taxable benefits are not insured; therefore, not subject to EI premiums. Taxable benefits must be reported on the T4 slip of the employee in box 14 “Employment Income” and in the “Other Information” area under code 40.

Please e-mail your questions to frankie@nashgirouxllp.ca.

Information provided is of a general nature. As each individual or company’s situation is unique, you may wish to consult with your CPA for information specific to your own needs.

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