Don’t Forget to Record Rental Payments When Your Employees Use Their Own Tools

by Craig Anthony

1 min read

There’s nothing more frustrating at tax time than to realize, after you’ve filed, that you skipped a potential deduction or credit. That can happen easily when you make rental payments to your employees for using their own tools and equipment on the job site. Canada’s tax laws anticipate that, from time to time, the tools your employees use to do their jobs might be theirs, not yours or your company’s supplies. It’s fair that you should pay the workers for the use of, and wear and tear on, their equipment, which is a standard employment clause in some industries. What you could easily overlook is that these rental payments are cash you’re paying your employees to do their jobs. Technically these payments aren’t wages, As a result, you should think about tax benefits every time your company cuts a check, and that’s doubly true if the payments are part of the paycheck you issue to workers. In the forestry business, for example, you might have several workers on a job site that’s so remote it’s impractical for them to start the day by driving to your shop and packing the company’s saws, straps, and wedges. In that case, it’s normal for workers to arrive at the site in their own trucks with tools from their own garages ready to go. To take full advantage of this benefit, itemize every payment you make that’s intended for equipment rentals, and keep copies of your records on hand in case of a CRA request for information. Record your expense in Box 14 of Form T4, where you usually include tips, vacation pay, and speakers’ fees.

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