# Benefits I pay for out of my own pocket Taxable?



## ghost2S7 (Jan 21, 2015)

I was hoping someone could help or at least give me some thoughts on how to proceed. My employer insists benefits I have to buy through my Association along with the dues and licensing are income to be added to my T4 on top of my commissions. 

To break it down further, I pay $40 in Association dues, $210 on Benefits (dental, basic life coverage, therapy etc) monthly with another $700 licensing fee once a year. My employer insists this $3,700 expense be added to my T4 as income. My issue with this is its not income, I pay for it. If I earn $4,000 in commission one month, that $250 for dues and benefits is deducted directly from what I receive making it only $3,750. If I make a certain amount per quarter they pay for benefits, but for 2014 that was not the case as I was short one quarter. 

I don't see how benefits I pay for could possibly be income under any circumstance. It's bad enough being 23 years old paying $210 a month for sub par "benefits" is bad enough but having that added to my income when it is no such thing makes no sense to me. Besides how could professional dues and licensing I also pay for (subtracted from commissions) while technically being self employed be income either? 

Could anyone give me some insight? Thanks!


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## Eclectic12 (Oct 20, 2010)

I haven't heard of Association dues or licensing fees being a taxable benefit.

The link on CRA's site isn't helping much ... unless the licensing/dues were a requirement of employment?
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/ds/prfssnl-eng.html

The generic version where you can pick specific letters to find the benefit.
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/menu-eng.html

Medical benefits on the other hand, tend to be a mix of both employer and employee paying so some of them can be taxable.
http://www.jasmith.com/taxable-benefits/


Hopefully someone can shed more light.


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## ghost2S7 (Jan 21, 2015)

Eclectic12 said:


> I haven't heard of Association dues or licensing fees being a taxable benefit.
> 
> The link on CRA's site isn't helping much ... unless the licensing/dues were a requirement of employment?
> http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/ds/prfssnl-eng.html
> ...



The licensing and dues are required but I pay for them entirely out of my own pocket. As for the benefits I pay 100% of the premium unless I hit a certain quarterly commission which I have no done. I have since gotten this from HR trying to explain but I honestly not following their train of thought. 


"Please refer to your ledger statements for details regarding the taxable charges that impact the T4. See example below for charges applied when there are lead commissions in the amount of $200.00:

Insurance is charged to your account for $100.00, it will appear on your statement as a taxable debit.

Commissions were $200.00, we apply that amount to your account as non-taxable, appears on statement as non-taxable credit.

Release $100.00 to you, this is charged to your account (at release) as a taxable debit. 


200.00 (non-taxable) lead commissions

-100.00 (taxable charge for insurance) this amount is reported as taxable earnings

100.00 (released as taxable) this amount is reported as taxable earnings

Initially charges are taxable upfront, commissions applied to offset those charges are non-taxable, once released they are released as taxable."


As far as I see something I pay for 100% out of my own pocket technically being self employed is not income in any way and is a write off as its a mandatory $3,700 yearly expense.


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## joncnca (Jul 12, 2009)

That doesn't make much sense, what they're doing, but I'm not an accountant.

I pay for my own professional dues out of pocket. As my expense, it certainly doesn't show up on my T4 as "income"....

When my wife reduced her teaching contract, benefit premiums that were previously paid by the employer became 100% payable by her. When that happened, we were able to claim a federal tax credit for the premiums paid...it was also, certainly not "income" on her T4.

http://www.cra-arc.gc.ca/tx/ndvdls/...ctns/lns300-350/330/llwxpns-eng.html#premiums


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## Spudd (Oct 11, 2011)

It seems to me that what they are saying is that all your commissions are taxable, whether or not they are used to pay for benefits. 

Earn: $200 in commissions
Spend: $100 on insurance
Release: $100 to you (your paycheck)

Your T4 would show $200 in earnings because that's what you earned. The fact you spent $100 on insurance and only got $100 paid to you is irrelevant. 

I'm not in payroll nor an accountant, so I could be wrong, but that's how I read what the (very confusing) HR person wrote to you.

Edited to add - if they are actually showing monies you spend on dues/benefits on your T4 even if this is higher than commissions earned, that seems dead wrong.


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## ghost2S7 (Jan 21, 2015)

Spudd said:


> It seems to me that what they are saying is that all your commissions are taxable, whether or not they are used to pay for benefits.
> 
> Earn: $200 in commissions
> Spend: $100 on insurance
> ...


The problem is they're putting the benefits, dues and licensing on top of my total commissions. So lets say I make $60,000 and pay the $3,700 in the cited expenses. My T4 should read $63,700 according to them. So what should I do if they're adamant but wrong? Call the CRA or something?


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## Spudd (Oct 11, 2011)

So there are 2 ways I can see this being:

1) You earn 63.7k in commissions but they deducted off 3.7k for the expenses, so take home is 60k, and the T4 says 63.7k
2) You earn 60k in commissions, pay 3.7k in expenses, and take home is 56.3k, but the T4 says 63.7k

If the first one, they're doing it right, IMO. If the 2nd one, I guess report them to CRA? Because if that's the case, you're being way overcharged for taxes. 

Is your "ledger" they referred to an electronic document, and if yes, could you post an excerpt of it showing how it works? It's not clear if you're confused or if they are horribly wrong. It seems more likely to me that you are confused since presumably they do this to ALL their employees and nobody else has complained.


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## ghost2S7 (Jan 21, 2015)

My ledger statements are weekly and only show commission. Not bonus or deductions. Ex, first week of the month reads $1,000 earned. I'll have $750 deposited into my account. So I'm not even sure what they're talking about in terms of ledgers. It's your example #2 is what they have done. 

Most of my colleagues hit the quarterly goals so their benefits etc are covered by the company. Since I had a one bad month of 2nd quarter of last year I have to pay for these expenses out of pocket 100%. I've told them maybe they just made the mistake thinking I hit all goals but they insist that does not matter.


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## Eclectic12 (Oct 20, 2010)

For the Dues and Licensing ... is the employer forwarding these to the proper place on your behalf?

This may be similar to the third URL's "Taxable Benefits" example of provincial health care premiums. Where the employer pays it from *their* funds (i.e. not a deduction from the employee's compensation), it is a taxable benefit. Consequently, most employers will forward the employee's money so that the employee doesn't have to do it.

For example, where the T4 shows $60K income and the company forwards $700 for licensing *from your compensation*, the net deposited to your bank would be $59,300. While this seems unfair - keep in mind that the tax return forms have line 212 "Annual union, professional or like dues (box 44 of all T4 slips)".

Sure, the $60K will reported on line 101 "Employment Income (box 14 on all T4 slips)" to end up with line 150 "Total Income". But before the taxes are figured out, in the "Net Income" section line 212 is going to report the $700, it will be totaled with other similar items on line 233.

This will be subtracted from the line 150 "Total Income" so that it is not included in line 236 "Net Income". The taxes are calculated in the next section "Taxable Income" ... so as long as the T4 box 44 has all the right expenses in it ... you won't be paying taxes on the association/licensing fees.


Bottom line is that is sounds like they acting as an agent for you, similar to the provincial health care premiums.


Cheers


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## Eclectic12 (Oct 20, 2010)

Spudd said:


> Edited to add - if they are actually showing monies you spend on dues/benefits on your T4 even if this is higher than commissions earned, that seems dead wrong.


Working through a tax form spreadsheet ... if the dues/licensing fees (I'm leaving aside benefits for the moment) show up in both box 14 *and* box 44, the tax form is going to subtract box 44 before the taxes are calculated. The result is they won't be taxed.

This is the same as Employee CPP contributions.


Cheers


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