Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Whether a one-time payment in recognition of past purchases of school supplies is taxable employment income
Position: No
Reasons: Treated as a reimbursement of expenditures that are the responsibility of the employer. No economic benefit considered received
2006-020438
XXXXXXXXXX Jack Szeszycki
(613) 957-8972
March 2, 2007
Re: Taxability of Allowance for Purchase of School Supplies
We are responding to your letter of July 27, 2006, in which you requested confirmation of your understanding of the proper tax treatment for a one-time, negotiated payment to teachers in respect of past purchases of school supplies.
You indicated in your letter that the XXXXXXXXXX negotiated a contract settlement that included, in addition to a signing bonus, a one-time payment of $300 in recognition of a general practice among teachers of purchasing supplies for use in the school in the course of their teaching activities. It is your understanding that this additional payment is not a taxable payment but more in the nature of a reimbursement of personal funds expended in the past on school business.
It is the Agency's general view that where an amount is paid to an employee on a one-time basis as a reimbursement in respect of expenditures made by the employee that would normally be the responsibility of the employer, the amount received by the employee would not be considered a taxable benefit and therefore would not be required to be included on the individual's T4 information slip. This position is based on the presumption that the employer is reasonably satisfied that the expenditure was made and that the amount paid was nominal in value.
We would also confirm that to the extent that the signing bonus is transferred directly to a registered retirement savings plan, that portion of the bonus is not included in the base amount for computing the amount of withholding for income tax. This is in accordance with paragraph 100(3)(c) of the Income Tax Regulations.
We hope our comments have been of assistance to you.
Yours truly,
Randy Hewlett
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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