Just yesterday we talked about how the CRA is trying to catch tax cheats around the country. But in addition to keeping Canadians honest, the CRA also steps in when help is needed – and is there to provide it. That’s the current case with flood victims in Alberta who are turning to their employers for help.
First, the laws. Tax laws currently state that if an employer provides financial assistance for employees in times of hardship, that assistance needs to be taxed at the end of the fiscal year. However, one Calgary employer was wondering if assistance given to flood victims could be exempt from those taxes.
Certain Calgary employers have been offering assistance to their employees that have been hit by the floods. Within these programs, employees are asked to contribute to a “relief fund” to help other employees affected. The employer then in turn, would match whatever funds were contributed and pass those on to affected employees. The money would be divided up between employees on a needs basis, so whoever needed it the most would be the ones to receive it.
But would they have to pay taxes on it, in some cases adding insult to injury?
In typical situations, the CRA states that any relief payment made by employers is taxable, unless it can be proven that the relief payment was made in the individual’s capacity as an individual, rather than an employee. But the CRA is now saying that upon meeting certain conditions, this relief will be considered to be given to a person, and not an employee.
Those conditions state that the individual “must be philanthropic in purpose to compensate individuals for personal losses or damage they suffered,” and that they must also be made “within a reasonable period of time.” The conditions also state that the individual receiving the relief must not be “a person of influence,” an executive with enough authority to control company decisions. Those in these positions could still receive relief, but only if it can be proven that the funds were still received as an arm’s length employee.
The final conditions state that the relief funds cannot be given based on an employee’s performance, position, or number of years with the company. It can also not be given in lieu of an employee’s salary, now or at any time in the future. And employers cannot deduct the expense as a business expense or as a charitable deduction.
Do you think the CRA should be applauded for this effort? Or is it what’s to be expected in times of need? Those employees contributing to the relief fund definitely deserve a resounding sound of applause in our humble opinion!