Some employees in Japan are in tough. There’s a work culture there where it’s frowned upon to leave the office before your boss, and there are tournament-style competitions to see who can work the most hours. The excessive work hours have led to health problems and deaths (from strokes, heart attacks and by suicide). One company, Taisei Co. Ltd., has tried to deal with the problem by flying drones through the workplace after hours, hovering over the desks of employees, blasting Auld Lang Syne (which is commonly used in Japanese shops to let folks know it’s almost closing time).
While tournament-style work binges aren’t as common here at home, employees here suffer from a different type of problem, which you might call “overtaxitis” – or the state of having far too few tax breaks available to reduce a heavy tax burden. Still, there are some tax tips that, as an employee, you should consider before year-end that could keep more money in your pocket.
Defer some income. If you expect your marginal tax rate (the rate of tax you pay on your last dollar of income) to be less in 2020, consider requesting that a bonus, or other taxable amounts, be deferred and paid to you early in the new year. On the flip side, if your marginal tax rate will be lower this year, you might try to accelerate some of those payments to pay less tax.
Deal with employee loans. If you’ve borrowed from your employer, be sure to pay any interest for 2019 by Jan. 30, 2020, to ensure you can reduce any taxable interest benefit for 2019. And if you haven’t borrowed from your employer, employee loans can be a nice perk since it can cost you less interest than borrowing from a bank, and you’ll face no taxable benefit as long as your interest cost is at or above the prescribed rate (just 2 per cent today). Speak to your employer about settling up loans heading into 2020.
Plan around company cars. If you drive a car provided by your employer, consider reducing the ugly stand-by charge (a taxable benefit for having a company car available for personal use) by reducing the number of days between now and year-end that the car is available to you (keep personal use under 50 per cent if you can). Also, consider purchasing the car from your employer at its depreciated value in order to avoid the taxable benefit next year. Finally, reduce the taxable operating cost benefit by reimbursing your employer for some or all of the operating costs on or before Feb. 14, 2020.
Negotiate a home office. Before year-end, negotiate with your employer the requirement to work from home more than half the time so that you’ll be able to deduct certain home office costs next year. Your employer will have to sign Form T2200 as evidence of this requirement.
Manage stock options. You may be entitled to a tax deduction for half of your taxable stock option benefits as an employee. But be aware that the government has plans to limit the deduction by proposing a $200,000 annual limit on stock option grants that will be eligible for the deduction after 2019. So, speak to a tax pro about whether it makes sense to exercise some stock options before the rules change. Also, the rules won’t apply to stock options granted by Canadian controlled private corporations (CCPCs) and other corporations that meet certain conditions.
Ask for courses and scholarships. Ask your employer to pay for job-related courses – which are a tax-free benefit to you – potentially in lieu of additional taxable compensation. Also, ask your employer to set up a scholarship program that can provide tax-free scholarships to the children of employees. Finally, starting in 2020, you may be able to claim the new Canada training credit on tuition fees, available to employees aged 25 to 65 who enroll at an eligible educational institution.
Request non-cash gifts or awards. If your employer normally provides gifts or awards for employees in the form of cash, ask them to consider a non-cash alternative instead. Each employee can receive a total value of $500 or less annually and pay no tax on the non-cash gifts or awards.
Reduce taxes deducted from your pay. If you expect to get a refund in 2020 because of certain tax deductions or credits (registered retirement savings plan deductions, charitable donations, certain support payments, moving expenses, etc.), you can apply to reduce your taxes deducted from your pay throughout 2020. Now is the time to request this to set yourself up for next year. File federal form T1213, or in Quebec file form TP-1016-V. The government will (one hopes) send you a letter of approval, which you can provide to your employer to reduce your taxes deducted at source.
Tim Cestnick, FCPA, FCA, CPA(IL), CFP, TEP, is an author, and co-founder and CEO of Our Family Office Inc. He can be reached at tim@ourfamilyoffice.ca.
Tim Cestnick