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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Whether payments made by a funeral home to employees of a church, and turned over to the church, constitutes employment income to the employees
Position: Question of fact. It is probably employment income unless it can be established that the employees received the amounts as agents of the church, for services performed by the church.
Reasons: Subsection 5(1) includes in employment income salaries, wages and gratuities received by employee in the year. Factual determination is required as to whether the employee receives the amounts, or whether he collects amounts as agent for the Church.
2001-007123
XXXXXXXXXX Wayne Antle, CGA
(613) 957-2102
April 10, 2001
Dear XXXXXXXXXX:
Re: Payments Made by Funeral Homes
This is in response to your letter dated February 13, 2001, concerning whether amounts paid to the minister and organist of the XXXXXXXXXX (the "Church") by a funeral home would be required to be included in employment income.
The Church is trying to institute a new policy whereby it has sent a letter to the funeral homes asking them to make all cheques payable to the Church for funeral services rendered. However, funeral homes continue to send separate cheques to the Church, the organist, and the minister for the funeral services provided. The Church has asked these employees to endorse the cheques and return the funds to the Church. You are concerned that the minister and organist would be required to report the amounts received as employment income even though they returned the money to the church.
Since your situation seems to relate to an actual proposed transaction, we refer you to our policy in this regard, which is set out in Information Circular 70-6R4. This circular explains that it is our policy not to provide written confirmation of the tax implications inherent in particular transactions unless the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in IC 70-6R4. Nonetheless, we have provided some general comments
Subsection 5(1) of the Income Tax Act (the "Act") provides that an individual's employment income for the year is his or her salary, wages and other remuneration, including gratuities, received in the year. Where the funeral home issues payments to the Church, and to the employees separately, it is our view that this is prima facie evidence
that the payments were received by the employees for services they performed, and would therefore form part of their employment income, similar to gratuities.
In order to conclusively determine whether the payments received by the employees from the funeral home form part of their employment income, we would need to review all of the facts and documentation surrounding the payments. The amounts received by the employees would not be included in their employment income, if it could be established that they received the payments as agents of their employer for services performed by the Church, and that they were required to pay the funds received to the Church.
Where the minister or organist is required to report the amounts as employment income, and the payments are subsequently given to the Church, then he or she would be entitled to claim a tax credit for donations and gifts in respect of the amounts given. For 2001, the Federal tax credit for donations and gifts is calculated as 16% of the first $200 of donations made during the year, and 29% of donations exceeding $200. Provincial income tax is similarly reduced by provincial tax credits for donations and gifts. Accordingly, it is possible for the minister or organist to receive a greater tax advantage from the tax credits for donations and gifts, than the additional tax resulting from the income inclusion, depending on his or her taxable income, and total charitable donations made, during the year.
If you wish to discuss this issue further, you may call or visit the Client Services Division of the Regina Tax Services Office, and provide them with all of the documentation related to the payments.
We trust that our comments will be of assistance.
Yours truly
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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