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Reporting Source Deductions, Auto Benefits and Standby Charges

If you have not already done so, be sure all employees on payroll have completed their new TD1 forms upon return to work in the first week of February to ensure source deductions are properly withheld and that only the right amount of tax—not one penny more—is prepared to the government with every paycheque. The 2008 Federal TD1 form can be found in EverGreen or on the CRA web site (Acrobat [PDF] file). Note the newly indexed amounts:

Remember that to request a reduction of tax withholdings (particularly if you make RRSP contributions in the year or have significant deductible child care costs, employment expenses or employment deductions on Line 228), also complete Form T1213, Request to Reduce Tax Deductions at Source.

Auto benefits should be calculated for the purposes of preparing T4 slips too. A new form for this purpose has just been released by CRA (Form RC18E); found in EverGreen or on the CRA web site (Acrobat [PDF] file). Note that you will use this form to do the following:

• Calculate the standby charge for employees who use an employer-provided vehicle for personal use. Under the simplified method (Original cost of the auto, plus taxes, x 24%) the standby charge does not take into account cases where personal use does not exceed 1667 kilometres per 20 day period. If that circumstance exists, the detailed calculation should be made to reduce the standby charge.
• Calculate the operating cost benefit which is used in cases where the employer has also paid operating expenses that relate to personal use of the auto.

The results of these calculations are then reported on the T4 slip as the total taxable auto benefit for 2007. The same worksheet is used to project the taxable benefits for 2008 and the resulting amount is added to the employee’s salary to determine the CPP and Income Tax Withholdings. These benefits are not subject to Employment Insurance Premiums.

Note that GST or HST remittances may be necessary as well. For more information on the payroll consequences of these provisions be sure to enrol in The Knowledge Bureau’s Advanced Payroll Course (Acrobat [PDF] file) by self study, part of the Certified Bookkeeping Services Specialist Program.

This information is used with the permission of Knowledge Bureau, Inc. For more information go to www.knowledgebureau.com.