21 April 2006 External T.I. 2006-0171251E5 - Unrecovered WSIB Advances

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 the mere existence of an employee loan from unrecovered WSIB advances constitute undue hardship that would allow employer to reduce withholdings without prior authority from the Agency.

Position: While the Agency has discretion to grant such an approval under subsection 15(1.1), we have to consider the specifics of each individual case to do so.

Reasons: As stated above.

								D Tiu
XXXXXXXXXX 							(613) 957-8961
								2006-017125
April 21, 2006

Dear XXXXXXXXXX:

Re: Reduction of Withholdings at Source, Subsection 153(1.1)
of the Income Tax Act (the "Act")

We are writing in response to your February 13, 2006 inquiry on the above subject and further to your subsequent telephone discussions with Dominic Tiu. You inquired whether the City could reduce the amount of income tax withheld from the regular pay of its employees because of the hardship imposed on them by a requirement to repay the City the unrecovered portion of WSIB advances when their WSIB claims are denied and their earned sick leave credits are insufficient to cover the entire balance outstanding.

In your letter, you outlined what appear to be actual fact situations related to transactions and events, which have taken place. The review of such situations is generally the responsibility of the local taxation services offices and, as outlined in paragraph 22 of Information Circular 70-6R5, it is not our practice to provide specific opinions on factual situations otherwise than in the context of an advance income tax ruling. In any event, a request cannot be considered for a ruling when the transactions are completed or where the issues involved are primarily questions of fact. Nevertheless, we are prepared to provide the following comments that we hope will be of assistance to you.

Paragraph 153(1)(a) of the Act requires that every person paying, inter alia, salary, wages or other remuneration shall deduct or withhold from the payment an amount determined in accordance with the prescribed rules and remit that amount to the Receiver General at the prescribed time. The prescribed amount and the prescribed time are set out in Part I of the Income Tax Regulations.

However, under subsection 153(1.1) of the Act, an employee may apply to the Agency for a "letter of authority" in advance of a payment of salary, wages or other remuneration to enable the employer to reduce withholdings on the payment(s) to the employee. The mere existence of an employee loan that must be repaid from an employee's remuneration does not necessarily create undue hardship. Therefore, reduction of withholdings at source without considering the specifics of each individual case would not be appropriate.

To obtain a letter of authority, an employee should write to the Client Services Division of his or her local CRA Tax Services Office and explain why the employee wants less income tax withheld. The letter of authority will normally take four to six weeks to be processed and generally will not be issued in a case where the employee has an outstanding balance or an overdue tax return. The letter of authority will be returned to the employee, authorizing a reduction in withholdings on the applicable payment(s).

We trust that foregoing is satisfactory.

Yours truly,

Randy Hewlett
Section Manager
For Division Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch