Subject: New Entitlement Codes – Non-Cash Gifts and Awards
June 19, 2013
1.1. The purpose of this directive is to provide information regarding new codes to report taxable benefits for non-cash and near-cash gifts and awards in the Regional Pay System (RPS).
2.1. Non-cash and near-cash gifts and awards given to an employee are a taxable benefit from employment. This taxable benefit must be taxed at source and reported on the employee’s tax slips in the year that it is received.
2.2. Currently, departmental finance sections provide a tax slip to employees who have received non-cash or near-cash gifts and awards from the employer. The problem with this process is that income tax and Canada Pension Plan (CPP)/Quebec Pension Plan (QPP) contributions have not been paid by the individual at source.
3. Procedures and Instructions
3.1. In accordance with Canada Revenue Agency (CRA) and Revenu Quebec rules on gifts and awards, non-cash and near-cash gifts and awards given to an employee are a taxable benefit from employment. A near-cash item is one that can be easily converted to cash such as a gift certificate or a gift card.
There is an annual $500 exemption for non-cash gifts and awards. An employee may receive an unlimited number of non cash gifts and awards with a combined total value of $500 or less annually. If the value of the non-cash gifts and awards given to an employee in the same year is greater than $500, the amount over $500 is a taxable benefit and must be included in the employee's income. For example, if the employee receives non-cash gifts and awards with a total value of $650, there is a taxable benefit of $150 ($650 – $500).
The $500 annual exemption does not apply to cash or near-cash gifts and awards. Cash and near-cash gifts and awards are always taxable.
3.2. Starting in 2013, taxable benefits for non-cash and near-cash gifts and awards will be reported on tax slips via the RPS for all active employees receiving non-cash or near-cash gifts and awards. This amount will be reported as follows on the employee’s tax slips:
- Box A: Employment Income
- Box G: Pensionable Earnings QPP
- Box L: Other Benefits
- Box 14: Employment Income
- Box 26: CPP/QPP Pensionable Earnings
- Box 40: Taxable Allowances and Benefits
3.3. A new non payable entitlement code, 1G4 Non Cash Gifts and Awards, has been created in the RPS to report the taxable benefit on the T4 and, if applicable, on the Relevé 1. The new code is subject to federal and provincial income tax as well as CPP/QPP contributions and will show as a payment on the employee pay stub. There also has been a new offsetting transaction created, deduction code 5G5, which will be system generated whenever a 1G4 transaction is reported.
3.4.1. CRA rules on gifts and awards:
3.4.2. Revenu Quebec rules on gifts and awards:
4. Procedures and Instructions
4.1. Effective April 26, 2013, both these codes have been created and are available in the RPS.
4.2. The compensation advisor is responsible for reporting this entitlement for all employees receiving taxable benefits for non-cash or near-cash gifts and awards. The compensation advisor will report an Entitlement Commence transaction (ENC 1G4 / PAC 18) using the rate base “0” lump-sum, the amount of the taxable benefit and the true effective date. The RPS will then automatically produce an offsetting Deduction Commence transaction (DEC 5G5 / PAC 16). These transactions will update with the next regular pay process and will never generate a supplementary payment.
5. Pay Office Responsibilities
5.1. Master Employee Element (MER) 739 (Other Taxable Allowances and Benefits) will be updated when the ENC/PAC18 1G4 processes. Upon request by a client department, the Pay Office will be required to update the T4/Relevé 1 for accounts Temporarily Struck Off Strength (T-SOS) or Struck Off Strength (SOS).
6. Personnel-Pay Input Manual (PPIM)
6.1. The PPIM will be updated to incorporate the changes included in this directive.
7.1. Any inquiries on the information contained in this directive should be addressed to your Public Works and Government Services Canada (PWGSC) Compensation Services Office.
- Date modified: