Principal Issues: 1. Whether workers' compensation benefits awarded by a workers' compensation board (Board), or similar body, is subject to statutory withholdings. 2. Whether supplementary payments made to an employee in excess of a workers' compensation award is considered income. 3. Whether an advance/loan provided to an employee in anticipation of a workers' compensation award is subject to tax. 4. Whether a deemed interest benefit would apply to an advance made to an employee in anticipation of a workers' compensation award. 5. Who is responsible for issuing the T5007?
Position: 1. No. 2. Yes. 3. Depends. 4. Depends. 5. Depends.
Reasons: 1. A Board awarded benefit will not be subject to statutory withholdings if it is included in income under 56(1)(v). 2. An amount paid in excess of a Board (or similar body) award is treated as employment income and is subject to income tax and CPP withholdings. 3. Where it can be established that an employee received a loan or advance from his or her employer which is to be repaid from anticipated future Board awards, the loan or advance is not considered income to the employee and is not a deductible expense to the employer. 4. CRA has a long-standing position that we will not consider as a taxable benefit any interest that accumulates on advances/loans while waiting for a Board claim decision. 5. Where a workers' compensation claim is adjudicated by a Board (or similar body), the Board issues the T5007 even if the employer makes the payment to the individual. A self-insured employer should report the workers' compensation benefit on a T5007 only when a Board (or similar body) did not adjudicate the claim for compensation.
