Question:
I have a question regarding processing hours that have been awarded to an employee after they have been dismissed. So I have been asked to process a payout equivalent to the missed opportunity of wages from 2018. I will be processing the payment in December 2019. Should I tax this as 2018 payment and amend the 2018 T4 form and RL-1 form, since the missed hours belong to 2018?
Answer:
The amount must be reported and taxed in the year of the payment. The earnings are subject to Employment Insurance , Quebec Parental Insurance Plan, (if Quebec, and only earnings not hours), Quebec Pension Plan ( with no pay period exemptions) and income tax all applied at the rate of 2019 year. You are required to amend the Record of employment and allocate the earnings to the final pay period of active employment. Because the payment will be paid in 2019 it will be reported in tax form of 2019, and you are not required to make any amendments for the 2018 tax forms.
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