Money owed to employee when company goes into receivership. After webb payment received can you claim loss wages on your income tax?

Question

Money owed to employee when company goes into receivership. After webb payment received can you claim loss wages on your income tax?

I have a client that received 4000 from the WEPP but he was owed 9000 when company went in receivership.

Can he claim the loss wages on his income tax?

That was my feeling also but the client is very sure he could claim it. I could not find any documentation that says he can. I am in agreement with you just wanted to make sure I was not misunderstanding. Thanks

Frustrated

IF client claims the whole $9,000 earned, then he COULD claim the $5,000 not received as a deduction. However, this is not possible and the net result, anyway, is claiming just the amount of $4,000 received. Perhaps your client could understand it if you phrased it something like this. Basically first answer is correct and very thorough.

s_gordon

Thanks for that feedback. I get this sort of stuff all the time from farmers who want to claim a loss when their cow or pig died. I'm forever pointing out that a natural death on the farm is the same as sending the animal to the slaughterhouse. It is just that in one case there is zero income and in the other whatever the income was from the sales barn.

jparsons

I enjoy your answers and, when I see you have answered a question, I know it is the correct answer.

s_gordon

More Actions

People come to ProFile for help and answers—we want to let them know that we're here to listen and share our knowledge. We do that with the style and format of our responses. Here are five guidelines:

Keep it conversational. When answering questions, write like you speak. Imagine you're explaining something to a trusted friend, using simple, everyday language. Avoid jargon and technical terms when possible. When no other word will do, explain technical terms in plain English.
Be clear and state the answer right up front. Ask yourself what specific information the person really needs and then provide it. Stick to the topic and avoid unnecessary details. Break information down into a numbered or bulleted list and highlight the most important details in bold.
Be concise. Aim for no more than two short sentences in a paragraph, and try to keep paragraphs to two lines. A wall of text can look intimidating and many won't read it, so break it up. It's okay to link to other resources for more details, but avoid giving answers that contain little more than a link.
Be a good listener. When people post very general questions, take a second to try to understand what they're really looking for. Then, provide a response that guides them to the best possible outcome.
Be encouraging and positive. Look for ways to eliminate uncertainty by anticipating people's concerns. Make it apparent that we really like helping them achieve positive outcomes.

Answer guidelines

Answer 1

Recommended Answer

2 people found this helpful

I don't see how the employee could claim anything if he wasn't taxed on it in the first place. Subsection 5(1) of the Act is very specific in establishing that only the amounts received by the taxpayer in the year from employment are to be included as income. Note that I said "received"; not income earned. The fact that the employee only received $4,000 instead of the $9,000 he was owed is unfortunate, but the T4, if it had been issued, should only show $4,000.

I imagine no T4 was issued at all, or if it was then it should not have been, since the employer did not actually pay the employee anything. WEPP payments fall under subsection 56(1)(r) which established that this is taxable income in the form of earnings supplements. The bottom line, therefore, is that the employee only reports $4,000 of taxable income so there is no loss in wages to claim as the unpaid $5,000 is not taxable under any subsection of the ITA.

Was this answer helpful? Yes No

jparsons

AllStar

Answer 2

Money owed to employee when company goes into receivership. After webb payment received can you claim loss wages on your income tax?

Recommended Answer

No answers have been posted

More Actions