Sharon D - Canada said:

How do I add it to his income?

If you use Sage 50 Payroll, add it as an income type 'Benefits'. 

As far as I understand, CRA will consider the amounts paid as 'Unreasonable Reimbursements' which can make them taxable, and other car expenses deductible, to the employee.  But if the employee didn't actually keep track, that could be problematic.

It's far simpler for everyone for the employee to keep track, and then submit mileage for reimbursement through payroll. 

I so agree- but my bosses may want to do it this way.  So I added it as an income type benefits- without the taxes-then do I put it in when I pay the bill?  Not when I do a paycheck is that correct?  Thanks a lot. Sharon

Hi Sharon:

Dependant upon the type of vehicle allowance will depend upon the taxable consequences. I would check CRA's article guide T4130. It may give you a better idea on how to handle the situation with your employee.

Sharon D - Canada said:

I so agree- but my bosses may want to do it this way.

So long as your bosses understand that, while what they are doing sounds reasonable, once outside the CRA rules of 'reasonable reimbursement per kilometre driven for work, CRA's position seems to be that an employer is more or less paying the employee (whether in cash, gasoline, services, or anything) and has to remit the tax, EI, and CPP owed, plus employer matching amount.  It's really not the best way.

Sharon D - Canada said:

So I added it as an income type benefits- without the taxes-then do I put it in when I pay the bill?

The entire amount paid to the employee / on behalf of the employee is taxable / a taxable benefit, not just the amount before sales tax.  The employer may not be allowed to claim a GST ITC unless it's a 'reasonable reimbursement'.

Sharon D - Canada said:

Not when I do a paycheck is that correct?

You can use any G/L account that you can post to both from A/P (to pay the bills) and from Payroll (to record the amount).   You could use Projects to keep track of the amounts if the company has multiple employees to keep track of, or use a manual method.

As agate suggested, do check the Guide, and always verify any advice from the Internet before acting on it.  I may be wrong.