THE TAX TIMES - pibusiness.capibusiness.ca/wp-content/uploads/2016/10/October_2015.pdf · TAX TIMES October 2016 HOLIDAY BENEFITS ... For a discussion of the options employers have

THE

TAX TIMES October 2016

HOLIDAY BENEFITS

It’s that time of year where the weather gets cool but hearts get warmer.

Many employers are planning to hold a Christmas party for their staff or

give out year-end bonuses to get into the spirit of the season. However, do

you know how these things affect your employees’ taxable income?

Christmas Parties

If you host a social event for all of your employees that costs $100 or less per

employee, it is a deductible expense to your business but does not have to be

reported on the employee’s T4 as a taxable benefit. If you go all out and rent

the hotel ballroom downtown, hire a band, have an open bar, etc., you may

need to add the value of the party to your employees’ T4 slips.

Gifts, Awards, and Rewards

Any extra payment you give your employees that is in cash or near-cash (gift certificates, prepaid credit cards, stocks, etc.)

is a taxable benefit that must be reported as personal income.

You can choose to “gross up” the cash payment by remitting an additional amount to CRA. If your employee has a 20%

average tax rate and you want them to take home a $500 bonus without having tax consequences, you can increase the

value of the bonus to $625 and then remit $125 to CRA on their behalf. The full grossed-up amount will appear on their T4

but the remittance should ensure they don’t have to pay additional tax next spring. If you need help with this calculation,

you can always contact your Pi representative.

Non-cash gifts and awards under certain circumstances can be treated as non-taxable benefits. Gifts (by CRA’s definition)

are for special occasions like weddings, birthdays, and religious holidays. Awards (again according to CRA) are for overall

work contribution and are typically only given to a limited number of employees based on an evaluation. Gifts and awards

are also only non-taxable if they total less than $500 in value for the year.

Rewards and/or incentives for good job performance or meeting specific job goals are always taxable regardless of the

format. Any other bonuses or extra payments are also taxable to the recipient.

Since cash bonuses are taxable to the recipient, but non-cash gifts under $500 per year are non-taxable, here are some ideas of gifts that you can give to your employees at this time of year

1. Tickets to a sporting event, concert, or play

2. Smartphones, tablets, or other electronics

3. Hotel or spa packages to alleviate work stress

4. Tuition for a personal interest class (work-related tuition is already non-taxable)

5. Seasonal gifts like gift baskets or a voucher for a turkey or ham

Pi Business Solutions Ltd. www.pibusiness.ca October 2016

CLIENT PROFILE

Noreen Ward – The Gift Designers

It was just an absolute pleasure chatting with Noreen Ward from The Gift Designers in

her beautiful, well-kept office/warehouse in SE Calgary. She is a positive force.

The Gift Designers began operating in 2002. Noreen’s employment situation was

coming to an end and she was at a crossroads regarding what her next step would be. A

girlfriend suggested that they should go into business together to sell gift baskets. Once

the business became established, the friend made the decision to move back to BC to be

with her family, leaving Noreen to be the sole owner and heart of The Gift Designers.

As it turned out, The Gift Designers is so much more than just gift baskets. Where they really excel is in helping

businesses build client loyalty. As we all know, it is much easier to look after and nurture existing clientele, than

continually have to pursue new business. That is where The Gift Designers come in, their exceptional products are

customized on each client’s specific needs.

For example, at the beginning of each year, a mortgage broker will provide Noreen with a list of clients for whom gifts are

required, and the expected delivery dates. The Gift Designers will then tailor the baskets to the specific needs, desires, and

budget of the client. Over the years, they have proven time

and again that the quality and creativity of their baskets

exceeds expectations, and are on time every time. The

testimonials on her website prove that focus on service

and products have paid off.

It is much easier to look after

and nurture existing clientele,

than continually have to pursue

new business.

Noreen’s extremely positive outlook was clearly

illustrated when our discussion turned to the upcoming

minimum wage. There is frustration because she knows

she will have to raise prices, but yet she maintains that her

team is her biggest asset and success in business is not achieved

by focusing on the negative. Knowing that she is employing people in this difficult economy is the most satisfying part of

her business. Noreen knows if she continues to make sound strategic decisions, has a clear vision and plan for the future,

The Gift Designers will continue to exceed its goals. For more information, visit www.thegiftdesigners.com.

Let us deal with CRA

on your behalf

A man walks into a restaurant

with his pet alligator on a leash. “Do you serve tax collectors?” he asks the bartender.

“Of course” says the bartender. “Well” replies the man, “I’ll have a beer,

and my alligator will have a tax collector.”

Pi Business Solutions Ltd. www.pibusiness.ca October 2016

SEPTEMBER TRAVEL CONTEST WINNER

We recently ran a contest through the month of September where we were

encouraging people to visit our new website and share our content with

their friends and family to get a chance to win a $1,000 prepaid Visa card.

We are proud to announce that the

winner of the contest is one of our

newest clients, Jamie Gervais.

Jamie owns a company called

FoodImpact and has been putting

on nutrition presentations in

Calgary schools for the last 5 years.

Children from ages 5 to 18 learn about

healthy food choices and get a chance to put their newfound knowledge to the test

by making a nutritious snack.

She is hoping to make good use of her prize

by taking a trip somewhere warm during the Christmas break and helping to fund

her expansion to Edmonton next month where she can reach even more Alberta

children. For more information about Jamie, FoodImpact or to arrange to have her

come out to your school, please email her at [email protected]

REFERRAL BONUS PROGRAM

In addition to the travel contest,

we also recently launched a referral program

allowing existing clients to refer prospective corporate clients

and get a $100 gift card to a restaurant of their choosing.

Since the beginning of September, we have given away 6 cards

to The Keg, Boston Pizza, and Ruth’s Chris Steakhouse.

WHERE CAN WE SEND YOU TO DINNER

NEXT MONTH?

Pi Business Solutions Ltd. www.pibusiness.ca October 2016

STAFF EDITORIAL The Hidden Costs of Raising Minimum Wage

As you likely already know, the NDP government has made a commitment to raising the minimum wage in Alberta to

$15.00/hour by October 2018. The underlying reasoning is hard to argue with. Who wouldn’t want to help people in

need? Low income families, single parent families, seniors without pension benefits, etc. might well need and benefit from

this kind of assistance. The government has published their case on why they believe raising the minimum wage is the best

way to accomplish this. www.alberta.ca/alberta-minimum-wage-changes.aspx

The sad truth is, this is only part of the story. Any benefit

received by these low-income workers has to come from

somewhere, so who is really winning and who is really losing?

If you listen to the soundbites, or read the propaganda, there is no downside to this legislation. In light of the fact that we

represent a significant number of employers, we felt that a more detailed analysis of the numbers was warranted. Wages

are often the largest single expense a business owner will incur and they need to understand the new financial reality. The

chart below is calculated based on a minimum wage employee working 40 hours per week, and while we realize that is not

always the case, we wanted to demonstrate the full potential impact.

Base rate before increase was $10.20 Calculations based on 2016 tax rates and credits

Hourly minimum wage rate

Total increase in employee's monthly

take home pay

Total increase in monthly government

revenue

Total increase in monthly cost

to employer

October 2015 $11.20 $122.89 $71.05 $193.93

October 2016 $12.20 $245.78 $142.09 $387.87

October 2017 $13.60 $417.82 $241.56 $659.38

October 2018 $15.00 $589.86 $341.02 $930.89

OVERALL, FULL-TIME EMPLOYEE ANNUAL TAKE HOME PAY COULD RISE BY AS MUCH AS $7,078.

It’s understood that even a small amount can mean a lot to low income earners, many of us having experienced that

ourselves. While this increase might be enough for some individuals, to experience a significant lifestyle improvement,

there is a caveat. Most minimum wage employees are not full-time and will not see the full benefit. In other cases,

employers may restrict the number of jobs, or restrict the number of hours per employee in response to these changes.

REVENUE FOR GOVERNMENT AGENCIES COULD NEARLY DOUBLE FROM $4,275 TO $8,368 PER EMPLOYEE.

37% OF THE INCREASED COST TO EMPLOYERS ENDS UP IN GOVERNMENT COFFERS.

These increases in government revenue are made up of both federal and provincial tax, as well as increases in both

employer and employee Canada Pension Plan and Employment Insurance premiums.

EMPLOYERS SHOULDER THE COST OF BOTH OF THESE INCREASES,

AND THEREFORE COULD END UP PAYING AN ADDITIONAL $11,171 PER EMPLOYEE PER YEAR.

When calculating the real cost of wages, employers often focus on just the hourly rate, while forgetting the other

associated costs. Those include increases to the employer’s portion of CPP and EI, as well as the cost of vacation pay. If

you are a small business with two or more employees, that cost will soon add up to be an unrecoverable amount.

For a discussion of the options employers have to deal with these realities, see our blog on October 28, 2016

Pi Business Solutions Ltd. www.pibusiness.ca October 2016

GET TO KNOW US – Teri Tetreault

Teri first started Pi Business Solutions in 2007, after having worked in the

income tax field for the previous 7 years. During that time, his roles included tax

supervisor, trainer for senior staff across Western Canada, and corporate tax

manager. As time went on, Teri found his vision of ideal customer service

diverging from his employer’s. That ongoing experience left him unsatisfied but

motivated to make a change.

"I set out to create a business that would deliver an opposite experience for the

client – one where we would promise exceptional service, and actually deliver on

that promise."

His commitment to that service promise has driven him to a level of expertise rarely seen in our industry. This expertise is

most apparent when he is engaged in corporate tax planning, overall tax optimization, and business consulting.

"I love saving clients piles of money! I really want to provide a service

that is superior to our competitors, that is delivered in a much more

personable way, and all at a fair price.”

When you offer this level of service, the business inevitably grows. Knowing that, Teri’s philosophy has

always been to invest in the right people when we find them – not when we already need them. That

way, the growth of our business never means the experience of the client has to suffer.

"We tend to hire in advance of demand on purpose so that we have the infrastructure in place when we

take on new clients. Though it’s a very expensive way to run a business, we believe it’s the only way. Many

other firms wait to have the demand, then hire the staff. Product quality can’t help but suffer when using that strategy.

Delivering quality is the most important thing we do, and we cannot lose sight of that."

"Never sacrifice quality or integrity for money. Ever. Period."

Teri sees accounting as a fun and strategic game he never tires of. "No two files are the same. There is always some little

twist. I love finding that unique solution, knowing that it's exactly right, and that no one else could make it any better.

Because every file is satisfying in its own way, my job is always rewarding."

In his spare time, Teri’s world centres around his adorable daughter Erica. When he’s not spending time with her, he loves

ball hockey, indoor soccer, and getting together with friends for game nights.

Watch for our next issue coming out in December when we will talk about important year-end tasks and tax law changes,

feature another client, and get to know someone else from Pi.

If you have any questions you’d like us to answer in an upcoming newsletter, email us at [email protected]