How Earnings Are Taxed – Tax on Employment Income

When you earn income from employment, this is generally taxable.  It is important to capture your employment income on your personal tax filings. 

Employment Income

Income will be reported on your T4 slips (or T4A for commission employees).  This should arrive within the first week of March as employers are required to complete the filings no later than the last day of February. 

Note if you earn employment income, you can claim the Canada employment amount as a tax credit.  This credit provides recognition for work-related expenses such as home computers, uniforms and supplies.  Note self-employed individuals are not eligible for this credit.  For the 2022 tax year, you can claim the lesser of $1,287 or the total employment income you reported on your return. 

Employee Profit Sharing Plans

Income earned from an employee profit sharing plan should be reported on a T4PS and make its way to your personal return. 

Tips

Additional reporting requirements include claiming any tips earned as income.  If you work in an industry where tips are earned, you should be aware that the CRA does maintain records of ratios to anticipate how much in tips should be included in your income.     

Taxable Benefits

Some benefits received may be considered taxable.  This includes premiums paid to cover you under a group term life insurance plan, supplementary unemployment benefit plans, medical premium benefits and wage earner protection programs.  These amounts should be reported on your T4 or T4A slips – however if they were missed, they should be reported on your tax return. 

Research grants

Research grants are taxable as a net of expenses incurred.  Expenses incurred should be deducted from the grant received and reported as other employment income.   

Foreign employment

As a Canadian resident, you are required to report your worldwide earnings on your personal tax return.  This includes earnings from foreign jurisdictions that may not have issued t-slips.  Your earnings should be reported in Canadian dollars; however, deductions may be available such as foreign taxes paid.  Note reporting should consider source deductions that may include payments to plans such as the US 401(k), 457 or 403(b) plan, US Medicare and Federal Insurance Contributions.

Royalties

Royalties received should be reported as income earned. 

Conclusion

While reporting your employment income should be straight forward, it is important to consider your worldwide income and benefits that may also have tax implications.  Shajani CPA Chartered Professional Accountants and Advisors have a team of Calgary Accountants, Edmonton Accountants and Red Deer Accountants ready to assist you in your personal tax filings.   

This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. ©2023 Shajani CPA.

Shajani CPA is a CPA Calgary, Edmonton and Red Deer firm and provides Accountant, Bookkeeping, Tax Advice and Tax Planning services.