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Payroll Fundamentals 1 2025 Update Actual Exam Questions And Verified Answers/Payroll Fundamentals 1 2025 Update Actual Exam Questions And Verified Answers/Payroll Fundamentals 1 2025 Update Actual Exam Questions And Verified Answers
Typology: Exams
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RQ and CRA define a car allowance as reasonable if: - ANSWER - The allowance is based solely on business kilometres driven in a calendar year
Personal Driving includes: - ANSWER - vacation travel
Business driving includes: - ANSWER - driving to existing and prospective clients, points of call, and other office locations of the employer
Availability (automobiles) - ANSWER The number of thirty-day periods that the automobile is available to the employee for the current taxation year. The employee has access to or control over the vehicle.
Automobile - ANSWER A motor vehicle that is designed or adapted to primarily carry individuals on highways and streets, and has seating capacity of not more than the driver and eight passengers
If a gift or award is given to an employee in cash - ANSWER The amount is considered pensionable, insurable and taxable to the employee, subject to all statutory deductions
Overtime meal allowance is considered non-taxable if (RQ): - ANSWER - overtime is done at the employer's request and is expected to last for at least two consecutive hours
The four categories of employment income - ANSWER - Earnings
Earnings - ANSWER Dollar amounts the employer pays an employee for the work they perform
Types of earnings - ANSWER - a salary
Allowances - ANSWER Additional dollar amounts paid to employees for the use, or anticipated use, of their personal property for business purposes
Benefits - ANSWER Dollar values attributed to something the employer has either provided to an employee or paid for on an employee's behalf
Expense Reimbursements - ANSWER Dollar amounts paid to employees to cover expenses that they incur while performing their job.
Regular payments - ANSWER Have an established frequency, such as weekly-paid salary or wages
Non-regular payments - ANSWER payments that do not occur each pay period, for example, a bonus or a retroactive adjustment
Salary - ANSWER A fixed amount of money paid to an employee for each pay period.
Salary per pay period - ANSWER Annual salary / number of pay periods per year
Wages - ANSWER Earnings which are based on the amount of time worked, usually at a rate per hour or per day
Regular earnings - ANSWER Hourly rate x pay period regular hours worked
Piecework - ANSWER A rate of pay earned per unit of production, regardless of the length of time taken
Self-Insured Disability - ANSWER Employers often offer disability coverage that provides their employees with income in the event of absence due to illness or injury
Sick Pay - ANSWER An amount paid to an employee who is absent from work due to illness or injury. Paid sick leave is only legislated in two provinces, PEI and Quebec. With the other provinces paid sick leave is up to the employer.
Formal Plans - ANSWER A plan structured to balance both the needs of the employee and the employer. Formal plans will outline provisions for the amount of sick leave, and whether the leave can be carried over to a following year.
Informal plans - ANSWER Informal, unwritten plans exist in organizations that have no formal policy for sick leave.
Wage-loss replacement plans (WLRP) - ANSWER An agreement between an employer and employees, or between an employer and a group or association of employees, under which the employees are compensated with payment on a periodic basis or the loss of employment income as a result of sickness, disability, maternity, or injury.
Short-term disability plans - ANSWER Plans that provide pay to an employee when he or she is unable to work because of a non-work-related illness or injury
Long-term disability plans - ANSWER Plans that provide disability income to employees who have exhausted their short-term disability coverage and are still unable to return to full-time employment
Vacation Pay - ANSWER The amount paid to an employee while off work on vacation leave
Overtime - ANSWER Time worked beyond the normal work day or work week
Shift Premiums - ANSWER Additional amounts paid over and above an employee's normal salary or hourly rate for working on an evening or midnight shift
Overtime meal allowance is considered non-taxable if (CRA): - ANSWER - the cost of the meal is reasonable (up to $17)
Meal allowance - ANSWER An amount paid or reimbursed to an employee that is intended to cover the cost of a missed meal due to working overtime or meal expenses incurred while on employer business
Tax on unreasonable car allowances - ANSWER Included in an employee's income and subject to statutory deductions
Tax on reasonable car allowances - ANSWER Reasonable car allowances are non-taxable and excluded from income
Car allowances can be provided as: - ANSWER - Flat amount
Car Allowance - ANSWER An amount paid or reimbursed to an employee who uses their personal automobile for business
Cash taxable benefits - ANSWER Subject to all statutory withholdings
Non-Cash taxable benefits - ANSWER Subject to all statutory withholdings, except for EI and QPIP premiums
If the employer reimburses employees for money they paid for the benefit - ANSWER The reimbursement is included in the employee's income as a cash taxable benefit
If the employer pays a taxable benefit to a third party - ANSWER The value is included in the employee's income as a non-cash taxable benefit
Taxable Benefits - ANSWER When an employer provides employees with items that are to the employee's benefits, the CRA and RQ may determine that the benefit is taxable to the employee
Taxable Benefit: Short-term and Long-term disability plans - ANSWER There is no taxable benefit
Taxable Benefit: Fees paid to employee for employee assistance plan - ANSWER Considered a cash taxable benefit
Taxable Benefit: Fees paid directly to the provider for an employee assistance plan - ANSWER not considered a taxable benefit
Employee assistance plans - ANSWER Make confidential counselling services available to employees for physical or mental health counselling or family counselling
Taxable Benefit: Provincial health insurance plans - ANSWER Not considered a taxable benefit
Taxable Benefit: Private health insurance plans (all provinces except Quebec) - ANSWER Not considered a taxable benefit
Taxable Benefit: Private health insurance plans (Quebec) - ANSWER Considered a non- cash taxable benefit
Taxable Benefit: Premiums paid for non-group plans (disability) - ANSWER Considered a non-cash taxable benefit
Taxable Benefit: Accidental death & dismemberment (AD&D) plans - ANSWER Premiums are considered a non-cash taxable benefit
Taxable Benefit: Group Term Life Insurance Plans - ANSWER All premiums paid by the employer are taxable
Registered Retirement Savings Plan (RRSP) contributions are non-taxable if: - ANSWER - The employee cannot withdraw the amounts from the group RRSP until they retire or cease to be employed
Personal living expenses - ANSWER If an employer reimburses an employee for personal living expenses the expense reimbursement is taxable
When a clothing allowance is taxable - ANSWER When the employee has the freedom to choose what they will wear and is not a distinctive uniform or required for safety reasons
Calculation of the taxable benefit on a regular loan - ANSWER tax on the interest the employee would have paid at the government-prescribed interest rate
Taxable benefit: Regular loan - ANSWER if it is received interest-free or below the government's interest rate it is considered a taxable benefit
When an employer provides a loan to an employee they must be classified as: - ANSWER a regular loan or a home purchase loan
There is no taxable benefit for tuition if: - ANSWER - An employer pays for an employee's course that is specifically related to the employee's position or career advancement and the employer is the primary beneficiary rather than the employee
When tuition paid is considered a taxable benefit - ANSWER When the employer pays for a course that is primarily for the employee's benefit.
There is no taxable benefit to parking if: - ANSWER - When free or subsidized parking is provided to a physically disabled employee
Taxable Benefit: Parking - ANSWER When the employer pays for the employee's parking it is considered a non-cash taxable benefit
Personal use of a cell phone is not considered a taxable benefit if: - ANSWER - the plan's cost is reasonable
Taxable Benefits: Employer paid cell phones for company use - ANSWER not considered a taxable benefit
Taxable Benefits: Allowance given to cover the cost of a cell phone/internet service - ANSWER Considered a cash taxable benefit
Gifts and awards that are near-cash (gift cards, stocks, gold nuggets, etc) - ANSWER Taxable employment income subject to CPP, income taxes and NT/NU payroll taxes, regardless of the value or the reason the employee receives it
Long-service awards - ANSWER Can use an additional $500 exemption as long as they have been employed for 5 years and it has been 5 years since their last award
Non-cash gift and awards exemption - ANSWER $500 per year that can be applied against the total value of all the non-cash gifts and awards given to an employee annually, any amount over is included in the employee's income as a non-cash taxable benefit
Non-regular payments - ANSWER Payments made that have no established frequency Non-regular payment examples - ANSWER - Retroactive adjustments
Retroactive earnings - ANSWER A delayed payment of earnings owed to an employee
Retroactive adjustment - ANSWER When the increase in wages in processed after the increase has been awarded
Retroactive increase - ANSWER When an increase in wages is awarded and the effective date is backdated
Reinstatement payment - ANSWER When an employee whose employment is terminated, is later reinstated, with back pay, as a result of a court decision or union intervention
Bonus or incentive payment - ANSWER a non-regular payment made to an employee above and beyond their regular wages
situations where an employee may be paid vacation without taking time off - ANSWER - payout of excess accrued vacation
Calculation methods of statutory deductions can vary whether the payment is: - ANSWER
Order of calculating statutory deductions for regular payments: - ANSWER - CPP
To calculate CPP deductions on a separate cheque (other than the regular wages) - ANSWER The manual method must be used. The pay-period exemption cannot be used again
To calculate EI deductions on a separate cheque (other than the regular wages) - ANSWER The same method is used as there is no exemption (other than the yearly maximum)
To calculate QPIP deductions on a separate cheque (other than the regular wages) - ANSWER The same method is used as there is no exemption (other than the yearly maximum)
Retroactive tax method - ANSWER The prescribed method for calculating income tax withholdings on retroactive adjustments or increases
Retroactive tax method is calculated by: - ANSWER Estimated annual net taxable income = pay period net taxable income x pay period frequency
Director's Fees - ANSWER Paid to an individuals who serve as members of a board of directors
Director's fees are considered: - ANSWER - pensionable for CPP
Death Benefits - ANSWER a discretionary payment made by an employer on the death of an employee, in recognition of the employee's service
Statutory deductions on death benefits - ANSWER The death benefit does not have CPP, EI, QPIP or the NT/NWT payroll taxes. They are subject to federal and provincial income taxes using the lump-sum method
Lump-Sum Tax Method - ANSWER The tax method used when the employee-employer relationship does not exist.
Commissions - ANSWER The dollar amounts an employee earns fr selling the organization's goods or services.
Three common methods of calculating commission earnings are: - ANSWER - Straight percentage of sales
Two common payment methods for commission payments: - ANSWER - Draw/advance against commission - the commission payment is made over two or more payments, with interim payment(s) called a draw or advance on commission
Draw/advance against commission - ANSWER Employees are paid an advance against their commissions owing; this payment is also known as a draw, which would typically happen when employees are paid on a monthly basis
Commissions are typically paid four ways: - ANSWER - commission paid with regular salary
Calculation of C/QPP contributions on commissions paid regularly with salary or commission only is done: - ANSWER The same method as for other employment income earned on a regular basis
C/QPP calculations for advance/commission payments - ANSWER Deductions are withheld on both
C/QPP calculations on irregular payments - ANSWER The yearly basic exemption is divided based on the number of days in the calendar year since the last payment. Days between payments / number of days in the year x Yearly basic exemption
EI/QPIP calculations on commission payments - ANSWER Calculated sing the straight percentage of insurable earnings
The method for calculating income taxes on commissions varies according to: - ANSWER
If employees incur personal expenses during the year that are not reimbursed by their employer - ANSWER can claim these expenses to reduce their taxable income when they file their personal income tax returns. They must complete a TD1X - Statement of Commission Income and Expenses for Payroll Tax Deductions
The purpose of the TD1X (Statement of Commission Income and Expenses for Payroll Tax Deductions) - ANSWER To allow commission employees to claim non-reimbursed expenses at source instead of waiting until they file their annual personal tax return
Employees who choose not to complete and submit a TD1X will - ANSWER have their income taxes calculated according to the regular payroll deduction method of the bonus tax method
Formula used on the TP-1015.R.13.1-V on calculating the percentage of commissions to be included in calculating the Quebec provincial tax - ANSWER Net commission for the year/gross commission income x 100
Northwest Territories/Nunavut Payroll Tax on commission payments - ANSWER If the employee's remuneration is subject to Northwest Territories and/or Nunavut payroll tax the commission payments are subject as well
An interruption of earnings occurs when an employee: - ANSWER - Has had (within the last 52 weeks or since the last ROE), or is anticipated to have, seven consecutive calendar days without both work and insurable earning from the employer or,
The 7 day rule (ROE) does not apply when - ANSWER An employee is paid mainly by commission
Block 6 when issuing a ROE for commission employees - ANSWER Always reported as weekly regardless of the actual pay period type used
Method for calculating total insurable hours for commission employes - ANSWER If there is no agreement the employee's hours are determined by dividing the total insurable earnings in the last 52 weeks by the provincial minimum wage then divided by 52 (or the period of employment if shorter) to determine the average weekly insurable hours. The weekly insurable hours cannot exceed 7 hours a day of 35 hours a week
Block 15b insurable earnings (ROE) for commission employees - ANSWER The employee's average weekly earnings are determined as follow:
Block 15C Insruable Earning by Pay Period (ROE) for commission employees - ANSWER The same number that was used in box 15B is used in all the pay period except for pp (final pay period) which will include any insurable amounts the employee received because of the termination to the average weekly earnings amount
The Record of Employment (ROE) - ANSWER The form completed by employers when an employee has had an interruption of insurable earnings
Electronic ROEs can be submitted to Service Canada using one of three methods: - ANSWER - Through the ROE Web using compatible payroll software to upload ROEs from the organization's payroll system
The paper ROE is a three part form, they are distributed as follows: - ANSWER - Copy 1 is given to the employee
For electronic filling of ROEs the ROE must be submitted by: - ANSWER - Up to five calendar days after the end of the pay period when the interruption of earnings begins
Special circumstances when an ROE is issued if there is no interruption of earnings - ANSWER - When Service Canaad requests one
Block 1 of the ROE - ANSWER Serial number. Each electronic ROE is automatically assigned with a serial number once it is submitted
Block 2 of the ROE - ANSWER Serial number of the ROE that is being amended or replaced
Block 3 of the ROE - ANSWER The employer's payroll reference number (optional)
Block of the ROE - ANSWER Employer's name and address
Block 5 of the ROE - ANSWER CRA Business Number (Payroll Account Number)
Block 6 of the ROE - ANSWER Pay period type. Choose a pay period type from the drop- down menu
Block 7 of the ROE - ANSWER Postal Code of the organization's address
Block 8 of the ROE - ANSWER The employee's Social Insurance Number (SIN)
Block 9 of the ROE - ANSWER The employee's name and address
Block 10 of the ROE - ANSWER The employee's first day of work for which they received insurable earnings, unless you have previously issued an ROE fir that employee then it is the rehire date
Block 11 of the ROE - ANSWER The last day for which paid or received insurable earnings (not necessarily the last day worked)
Block 12 of the ROE - ANSWER The end date of the final pay period that includes the date entered in Block 11
Block 13 of the ROE - ANSWER Occupation of employee (optional)
Block 14 of the ROE - ANSWER Expected date of recall for the employee to return to work (optional)
Block 15A of the ROE - ANSWER Total insurable hours
Block 15B of the ROE - ANSWER Total insurable earnings
Block 15C of the ROE - ANSWER Detailed insurable earnings by pay period
Block 16 of the ROE - ANSWER Reason for issuing the ROE
Code A of the ROE - ANSWER Shortage of work
Code B of the ROE - ANSWER Strike of lock-out
Code C of the ROE - ANSWER Return to school (this code is being phased out)
Code D of the ROE - ANSWER Illness of injury
Code E of the ROE - ANSWER Quit, used when the employee initiates the termination of employment. If using the ROE Web choose the appropriate reason from the drop-down (Quit, follow spouse, retirement, school, take another job, health reasons)
Code F on the ROE - ANSWER Maternity, used when a birth mother is leaving the workplace to take maternity leave (not for adoptive parents)
Code G of the ROE - ANSWER Retirement - Used when an employee is leaving the workplace because of mandatory retirement or through a Work Force Reduction approved by SC (if the employee is voluntarily retiring code E is used)
Code H of the ROE - ANSWER Work Sharing - when the employee is participating in the SC Work-Sharing Program
Code J of the ROE - ANSWER Apprentice training - used when the employee is temporarily leaving the workforce to participate in a government-approved apprenticeship program
Code M of the ROE - ANSWER Dismissal - used when the employer initiates the termination of employment for any reason other than a mandatory retirement of layoff
Code N of the ROE - ANSWER Leave of absence - Used when an employee is leaving the workforce temporarily to take a leave of absence (other than for illness, injury, maternity, paternity, adoption of compassionate care leave)
Code P of the ROE - ANSWER Parental - used when the employee is leaving the workforce temporarily to take parental, paternity, or adoption leave
Code Z of the ROE - ANSWER Compassionate care - used when the employee is leaving the workforce temporarily to claim compassionate care benefits
Code K of the ROE - ANSWER Other - used only in exceptional circumstances, such as change in payroll/ownership name, change in pay period type, death of an employee, SC has requested an ROE
An employee-employer relationship is deemed to exist when any one of the following statements is true: - ANSWER - the employee retains the right to be recalled to work
When employers initiate the termination of an individual's employment they: - ANSWER are required to provide the employee with written notice that their employment is being terminated, or pay the employee wages in lieu of working the notice period
Wages in lieu of notice are considered (except for Quebec) - ANSWER Income from employmentQu
Wages in lieu of notice are considered (Quebec) - ANSWER a retiring allowance
Types of earnings included in the calculation of vacation pay for Alberta: - ANSWER - regular wages or salary
Types of earnings included in the calculation of vacation pay for Ontario: - ANSWER -
regular wages or salary - overtime pay
Types of earnings included in the calculation of vacation pay for Quebec: - ANSWER -
regular wages or salary - overtime pay
Severance pay - ANSWER not considered income from employment but instead considered a retiring allowance
Under the Canada Labour Code, Part III, an employee who have 12 months of continuous service, and are not being terminated for just cause, are entitled to the greater of: - ANSWER - 2 days' wages at the regular rate, excluding overtime, for each completed year of employment
Under Ontario legislation, an employee qualifies for severance pay if their employment is severed and they: - ANSWER Worked for the employer for five or more years and the employer has a payroll in Ontario of at least 2.5 million or the employer severed the employment of 50 or more employees in a six-month period because all or part of the business permanently closed
In Ontario severance pay is calculated as: - ANSWER - One week's regular wages for each full year of service plus
Maximum severance payment in Ontario - ANSWER 26 weeks of regular wages
Persons entitled to severance pay include: - ANSWER - regular full-time and part-time employees
who, on termination, retire and accept the reduced pension
Employees are not entitled to severance pay when they: - ANSWER - refuse a reasonable offer of alternate employment
The following payments are required on termination of employment - ANSWER - wages
in lieu of notice - vacation pay
Salary continuance - ANSWER When employers choose to keep paying an employee when they have been terminated their regular salary for a specified period of time and continue to maintain these individuals on the organization's benefit plans even though the employee is not longer required to report to work
Salary continuance is considered: - ANSWER Regular employment income and is subject to all statutory deductions, if applicable