Understanding the difference between a cash taxable allowanc

Understanding the difference between a cash taxable allowance, a cash taxable benefit and a non-cash taxable benefit is critical when explaining the calculation of net pay to an employee. In your own words, explain whether each allowance and benefit is or is not subject to Canada/Québec Pension Plan (C/QPP) contributions, Employment Insurance (EI) premiums, Québec Parental Insurance Plan premiums and income tax. Provide an example of a cash taxable allowance, a cash taxable benefit and a non-cash taxable benefit.

Solution

A cash taxable allowance usually an amount that paid by employer to employee for a specific purpose. Usually for in addition to salary or wages. To help the employee for certain expenses without knowing the actual cost.

An allowance such as car allowances calculated based on distance driven.

A cash taxable benefit is goods or services that employer pays to their employees or their family. Such as rent-free accommodation owned by the employer. A benefit includes an allowance or a reimbursement of employee’s expenses i.e. personal in nature.

A cash taxable benefits are one type of remuneration subject to Québec Parental Insurance Plan premiums (QPIP).

Taxable benefits and taxable allowances included in gross employment income for calculation of the Canada/Québec Pension Plan (C/QPP) contributions.

If a non-taxable benefit is paid by the employer, the general rule is that no Employment Insurance (EI) premiums are due and reporting needed on the reporting on the ROE (Return on Equity).

A non-taxable benefit related to a public transit pass or a para-transit pass with regard to which employer reimburse an amount to an employee. This pass that provided to the employee is not subject to QPIP premiums.