We all LOVE Christmas bonuses…

It is coming up to that time of year again where businesses are starting to think about Christmas parties and whether or not they will be giving their employees a Christmas bonus.  If you are an employer, be sure you understand what is involved with paying that bonus.

ScroogeIt is important to remember that all bonuses are taxable and must have deductions calculated and remitted to CRA.  If for example you wish to give an employee a $500 bonus, the cheque should not be written for $500 as it needs to have the appropriate tax taken off first.  Also, the extra $500 should not simply be added to the gross amount of pay for that employee.  The deductions for that bonus need to be calculated seperately.

If at all possible, the bonus should be paid on a regular payroll cheque with a separate line on the paystub indicating the amount of the gross bonus.  By creating a seperate cheque for the bonus, it will change the number of payments issued to a monthly, semi-monthly or bi-weekly employee and may result in incorrect reporting on the T4s at year end.

 If you need some assistance to determine your bonus deductions, please contact us at the office and we would be happy to help.  Please have the amount of the regular pay for that pay period ready, as well as the total of all other bonuses that may have been given throughout the year.  We will need those amounts to make the correct calculations for both the bonus and gross paycheque.  Otherwise, you can determine the correct calculations by using the Canada Revenue Agency Payroll Deduction Calculator on the CRA website at http://www.cra-arc.gc.ca/esrvc-srvce/tx/bsnss/pdoc-eng.html

 

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About Cougar Ridge Bookkeeping

We know that to be successful in business, keeping good records is vital. We also know that operating a successful business takes hours of dedication and hard work. For many, it means that the bookkeeping gets put on the "to-do list". We are here to help you!
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