01-10-2019, 09:34 AM
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#1
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First Line Centre
Join Date: Feb 2003
Location: Edmonton
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Tax question - Employee Loans
Hi all,
At my company we have a few employees with long term interest-free employee loans. I haven't been involved with them other than recording the entries so I assumed they were being completed correctly. We were asked to forgive one of the loans and when we advised HR that it had to be recorded on the T4 it caused a lot of push back that we just need to "write if off".
This made me dig deeper and realize that the taxable benefit from the interest may not have been recorded on previous loans. The explanation I got was that employees are told there is a benefit and they should report it themselves with their return, but I can't seem to find any bulletin or regulation that allows this, only that the employer is responsible for reporting it on the T4.
Can someone help me clarify?
Thanks!!
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01-10-2019, 10:11 AM
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#2
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Backup Goalie
Join Date: Dec 2014
Exp:
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01-10-2019, 10:15 AM
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#3
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Franchise Player
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Debt forgiveness is just income, generally... so they'd probably have to just take the whole principal of the loan as income this year. I think it's s.80 or so?
As for the benefit, I'm pretty sure it is T4'd. If they're shareholders as well as employees, it may raise some s.15 issues for you as well.
This is one of those things where we need an accountant.
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01-10-2019, 10:18 AM
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#4
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Franchise Player
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it sure feels like an interest free loan would generate some type of taxable benefit
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01-10-2019, 10:20 AM
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#5
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broke the first rule
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Yeah, there's a benefit and should be T4'd. PM Sent.
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01-10-2019, 10:23 AM
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#6
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Franchise Player
Join Date: Mar 2007
Location: Income Tax Central
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Quote:
Originally Posted by calf
Yeah, there's a benefit and should be T4'd. PM Sent.
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Basically this.
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01-10-2019, 10:38 AM
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#7
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First Line Centre
Join Date: Feb 2003
Location: Edmonton
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Yup for sure there is a benefit, I am just running into pushback about if we report it or if we can push that responsibility to the employee. The answer I got was "the last controller worked at EY and she said it was fine to make them sign a letter that they take responsibility for reporting the benefit", but I just don't think this is correct. Unfortunately all of my accounting training is reporting and management side and I haven't touched tax implications in years.
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@PR_NHL
The @NHLFlames are the first team to feature four players each with 50+ points within their first 45 games of a season since the Penguins in 1995-96 (Ron Francis, Mario Lemieux, Jaromir Jagr, Tomas Sandstrom).
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01-10-2019, 10:44 AM
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#8
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Franchise Player
Join Date: Mar 2007
Location: Income Tax Central
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Quote:
Originally Posted by belsarius
Yup for sure there is a benefit, I am just running into pushback about if we report it or if we can push that responsibility to the employee. The answer I got was "the last controller worked at EY and she said it was fine to make them sign a letter that they take responsibility for reporting the benefit", but I just don't think this is correct. Unfortunately all of my accounting training is reporting and management side and I haven't touched tax implications in years.
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No. Strictly speaking the onus is upon the employer to report the income on the T4 as a taxable benefit.
Making the employee sign some letter is swell and all, but the employer is going to want to write that loan off and there has to be a corresponding item for it, you cant just trust that the employee is going to do it.
By the employee defaulting on an employer loan it has transitioned from a 'loan' to 'employment income' or a form of bonus, the employer has to record it as such.
__________________
The Beatings Shall Continue Until Morale Improves!
This Post Has Been Distilled for the Eradication of Seemingly Incurable Sadness.
If you are flammable and have legs, you are never blocking a Fire Exit. - Mitch Hedberg
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01-10-2019, 10:51 AM
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#9
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First Line Centre
Join Date: Feb 2003
Location: Edmonton
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Thanks everyone!
And thanks for the confirmation Locke. That is basically how I was explaining it to them, it didn't make sense to me either to pass the onus to report to the employee. I know enough to realize that someone knows more, but I just couldn't get my head around it, regardless of where the previous controller worked.
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@PR_NHL
The @NHLFlames are the first team to feature four players each with 50+ points within their first 45 games of a season since the Penguins in 1995-96 (Ron Francis, Mario Lemieux, Jaromir Jagr, Tomas Sandstrom).
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01-10-2019, 12:01 PM
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#10
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First Line Centre
Join Date: Oct 2010
Location: Deep South
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Came to help, but help was already provided. Still left satisfied with the Kramer reference.
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01-10-2019, 12:29 PM
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#11
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Franchise Player
Join Date: Mar 2007
Location: Income Tax Central
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Quote:
Originally Posted by mrkajz44
Came to help, but help was already provided. Still left satisfied with the Kramer reference.
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Lots of accountants on this board.
__________________
The Beatings Shall Continue Until Morale Improves!
This Post Has Been Distilled for the Eradication of Seemingly Incurable Sadness.
If you are flammable and have legs, you are never blocking a Fire Exit. - Mitch Hedberg
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