AFM202 Study Guide - Final Guide: Business Travel, Disability Insurance, Employee Benefits
Final exam part 3
Employee vs self employed
• An employee is limited to certain deductions from employment income but a self-employed
business person can deduct all reasonable expenses incurred to earn business income
• Employees and employers each pay CPP .% of a eploee’s salar i eess if $ up
to a maximum salary of $54900
• Employees pay 1.88% of their salary up to a maximum salary of $50800 for EI
• Employers must pay 1.4 times of that amount for EI.
• “elf eploed perso do’t pa EI ut hae to pa oth the eploer’s share ad the
eploee’s share of CPP up to aiu of $.. CPP paid as the eploer’s share
can be deducted as a business expense.
• A business may choose an off-calendar year end for business however any business income
earned from a sole-proprietorship with an off-calendar year end must include in income an
estimate of the income for the calendar year.
• A estiated ioe iluded i a tapaer’s ioe is deduted fro the
tapaer’s ioe i the folloig ear.
• E.g. if the year end is Jan 31st, must take the income earned in the month of Jan and
multiply it by 335/31.
• This estiate of additioal ioe to report i the aledar ear is ko as stu
period ioe.
• Employment income is included in income on a cash basis. For example, a bonus may be
paid to a eploee i related to the eploee’s aoplishet. This ous is
included in the 2017 employment income.
Deductions from employment income
• Allowance received for motor or travel expenses is not taxable to the employee as income if
its reasonable.
• Unreasonable allowance will be added to the income but the employee can claim a
deduction for eligible expenses.
• Alloae paid a eploer to a eploee for usig the eploee’s ar is reasoale.
$0.54/km for the first 5000 km and $0.48 for each additional km driven in 2016.
• Legal expenses paid in related to the collection of salary from an employer is deductible
• 81h: Paid to travel for employment purposes is deductible. The employee must be away
from work.
• h: Epeses relatig to a otor ehile used for ork is dedutile. Does’t out
driving to and from work.
• COMMISSIONED EMPLOYEES
• Can choose between deduct the expenses allowed under 81h and 81h1 or deduct
reasonable selling expenses paid in the year under 81f which is more than just travel and
motor vehicle expenses.
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