This new content has been developed for clarity, completeness and plain language. No changes were made to the CRA's treatment of advance payments.
You may provide advance payments to your employee for salary, wages or commissions that they are expected to earn in their employment with you.
On this page
- Determine if you need to report the payment on a slip
- Withhold and report the payment on a slip
- References
Determine if you need to report the payment on a slip
Generally, if you make an advance payment, you will need to report the payment as employment income on the employee’s T4 slip in the year the advance was received.
If you provide payroll advances to your employees, this is generally not considered an employer provided loan. The advance is considered as employment income.
Learn more: Loans and employee debt.
Special situation: Advances related to workers' compensation claims
Depending on the situation, advances made to your employee related to a workers' compensation award may be considered as employment income.
Learn more: Payments related to workers' compensation claims.
Withhold and report the payment on a slip
If the advance payment is considered employment income, you must withhold the following deductions and report on a T4 slip.
The amounts you withhold must be included in the pay period they were received or enjoyed.
Withhold : Option 1
- Income
- CPP
- EI
Report on a T4 slip: Option 2
- Box 14 – Employment Income
- Box 24 – EI insurable earnings
- Box 26 – CPP/QPP pensionable earnings
Learn more:
References
Legislation
- ITA: 5(1)
- Income from office or employment
- ITA: 153(1)(a)
- Withholding
- ITA: 200
- Remuneration and benefits
- CPP: 12(1)
- Amount of contributory salary and wages
- IECPR: 2(1)
- Amount of Insurable Earnings
- IECPR: 2(3)
- Earnings from Insurable Employment