Taxable bonus but do not need to made deductions

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Paul Cook

• January 28, 2016 15:52

I'm trying to record a bonus payout that is taxable income but the employee has authorization from CRA that deductions need not be withheld. (Corresponding RRSP contribution) How do I record this so that it appears in box 14 of the T4?

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• Official comment

  

  Agent 200

  • April 26, 2016 16:02

  Thanks for your question Paul, You can easily do this within the program.  If we are understanding the scenario, you want the bonus to be listed as taxable income in Box 14 of the T4, but you want it to not be taxed because you have a "letter of approval" from CRA that it is ok to not be taxed because it is going directly into an RRSP.  If that is the case here is how to do it:

  Create a rule under COMPANY SETTINGS>PAY RULES>DEDUCTIONS for your RRSP contribution.  Create a deduction rule  for the RRSP deduction and set it to reduce taxable gross.  Do NOT enable it.  If your accountant/CRA advises you to do so you can also set it to reduce Insurable and Pensionable Gross here as well.  Save the rule.  **NOTE you can only create customized rules on our paid plans.  Green plan users will have to use rules that are already preset in the system, but you can modify their tax status.

  After you have created your rule, then go to the employee and add the rule under the deductions tab for the full amount of the bonus you are going to pay.  

  See here for more information on custom rules and how to use them: https://paymentevolution.zendesk.com/hc/en-us/community/posts/204562485-Custom-rules-for-benefits-deductions-and-earnings

  Then you are ready to run payroll.  Go ahead and pay your bonus as an additional earning (within a regular payrun or as a special run) and on the calculate tab please use custom calculations to enable the deduction rule one time.  This will pay the employee the bonus amount but also reduce the taxable gross by this amount when it calculates.  

   

  Don't forget to make the RRSP payment on your employee's behalf!  

   

  Thanks for checking our help pages.  Have more questions, post them here: 

  https://paymentevolution.zendesk.com/hc/en-us/community/posts/new

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  908 Engineering Inc.

  • February 23, 2016 21:06

  I have the exact same question. All I did was run a special payroll, enter it as a bonus and then manually set the source deductions to $0. It was reasonably easy but it would be nice if there was a category that counted as taxable income but omitted the source deductions.

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