Reduction of Taxable income in Sage 50

Question

An employee has an approved T1213 from CRA. How do we reduce his taxable income, but not affect his net pay. Have tried setting up a user defined expense, but that did not seem to work.

C White · Answer

The T1213 do NOT reduce taxable income (you still have to report his actual earnings on his T4 slip at the end of the year. It also does NOT reduce the income used for calculating CPP and EI deductions. 
 Because of this, you need to leave the income section of his paycheque completely alone. 
 Also, you do not want run it through user defined expense, because that will make it difficult to track how much you need to remit to the Receiver General for payroll deductions each year. 
 You will need to make adjustments to the 'Taxes' tab in his employee setup. I haven't dealt with a T1213 in Sage recently, but you may need to adjust the other indexed amounts upward, or maybe put a negative amount in 'extra tax' (if negative amounts are allowed there).

Alwyn · Answer

I have not use this for about five years but I have used two taxable income lines. The first is for the amount after the reduction from the T1213. This amount is fully taxed with CPP (CPP2) and EI as well. The second line is for the Income that is not taxable. Tax is not calculated but still with EI and CPP (and CPP2 if necessary). This worked great for the Clergy Housing Allowance after the CRA approval is received.

Sage 50

Reduction of Taxable income in Sage 50

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