Normally, advances or loans are offset or repaid when a claim is paid by the workers' compensation board. You do not have to report the advances or loans paid to the employee on their T4 slip.

However, if the workers' compensation board denies a claim, and the advance or loan is not repaid in the year the claim is settled, we consider the employee to have received a benefit from employment in the year that the claim is denied. The amount of the loan or advance has to be reported on a T4 slip with CPP contributions, EI premiums, and income tax withheld.

If the claim is denied and you use the employee's sick leave credits to repay the loan, this amount has to be reported on a T4 slip with CPP contributions, EI premiums, and income tax withheld.

If income tax deductions cause undue hardship to the employee, they can contact any tax services office to ask for a letter of authority. The letter will allow you to deduct less tax.