Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues:
What are the responsibilities with respect to the accuracy of the information provided by employees regarding the personal use of an employer-provided automobile?
Position TAKEN:
The employer should make a reasonable effort to determine that the information is accurate and complete.
Reasons:
The employer is responsible for reporting the correct amounts on the T4 slip. Further, the amount of the benefit impacts the employee's taxable income, CPP pensionable income and could affect provincial or territorial payroll levies. As a result, the employer could be subject to interest and penalties related to the failure to withhold the sufficient tax.
XXXXXXXXXX T. Young, CA
2003-002686
October 3, 2003
Dear XXXXXXXXXX:
Re: Employer Responsibilities - Standby Charge Calculation
We are writing in response to your email dated June 26, 2003, concerning an employer's responsibilities in respect of the calculation of the standby charge and operating cost benefit for an employer-provided automobile.
In the example you provide, employees are asked by the employer to maintain a vehicle log to keep track of personal and business kilometres driven using an employer-provided automobile. The data on the log sheets are entered into the payroll system so that the taxable benefit will be calculated and included on the employee's T4 slip.
You have asked us if the employer bears any responsibility for the veracity of the log sheet submitted by the employee. You have also asked us if there will be any tax liability borne by the employer if the amounts entered into the system, on behalf of the employee, are incorrect.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. However, we are prepared to provide the following comments, which may be of assistance to you.
As stated in Chapter 1 of Guide T4001, Employers' Guide: Payroll Deductions (Basic Information), an employer must:
? deduct Canada Pension Plan (CPP) contributions, Employment Insurance (EI) premiums, and income tax from amounts you pay to your employees;
? remit these deductions along with your share of CPP contributions and EI premiums that you have to pay throughout the year on your employees' behalf [see the guide called Remitting Payroll Deductions (RC4163)]; and
? report the employee's income and deductions on the appropriate information return by the end of February of the following calendar year [see the guides called Filing the T4 Slip and Summary Form (RC4120), Deducting Income Tax on Pension and Other Income, and Filing the T4A Slip and Summary Form (RC4157), and Filing the T4F Slip and Summary Form (RC4200)].
Although it is the employee's responsibility to maintain accurate records in order to enable the employer to calculate the standby charge and operating cost benefit, employers need to take reasonable steps to ensure that the information provided is accurate and complete. If the employer has doubts about the accuracy and completeness of the information provided, the employer should discuss the matter with the employee.
While the employee is responsible for providing accurate and complete information to the employer and is ultimately responsible for reporting his or her income correctly on the employee's T1 return, subsection 153(1) requires the employer to withhold the correct amount of income tax from the employee's salary, wages or other remuneration. If the standby charge and operating cost benefit are calculated incorrectly, it could result in the employer under-deducting income tax. The under-reporting of automobile benefits could also impact the calculation, deduction and reporting of other amounts, including:
? Canada Pension Plan contributions,
? GST/HST remittances, and
? various provincial and territorial taxes and levies.
This could subject the employer to interest and penalties on these amounts.
The documents referred to above may be found on our web site at www.ccra.gc.ca. We trust our comments will be of assistance to you.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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