T4 Box 85 Explained: How Employers and Employees Can Navigate Non-Cash Benefits in Canada
Filing T4 slips can be tricky, especially when it comes to non-cash benefits like private health services plan (PHSP) premiums. One specific section that often raises questions is T4 box 85. This blog will clarify what Box 85 of the T4 slip means, why it's important for both employers and employees, and how to report PHSP premiums accurately to avoid issues with the Canada Revenue Agency (CRA).
What is T4 Box 85?
Box 85 on the T4 is used to report the total amount paid by an employer for an employee’s private health services plan (PHSP). This includes premiums for health, dental, or vision insurance that the employer provides. While the amount in Box 85 T4 is not taxable income for employees, it still must be reported for CRA records.
Why is Box 85 Important for Employers?
For employers, properly filling out Box 85 of the T4 slip is essential for several reasons:
CRA Compliance: The CRA requires employers to report all employee benefits, including PHSP premiums, to avoid fines or audits.
Avoid Payroll Audits: Misreporting Box 85 on the T4 slip could trigger a payroll audit, which can be costly and time-consuming.
Employee Clarity: Employees rely on accurate reporting of their non-cash benefits for tax filing. Mistakes in Box 85 T4 can lead to confusion and tax return delays.
How to Report PHSP Premiums in T4 Box 85
Employers should follow these steps to ensure Box 85 on T4 is filled out correctly:
Calculate Total PHSP Premiums: Add up all premiums paid for the employee’s health, dental, or vision plans during the tax year.
Enter in Box 85: Report the total amount in Box 85 of the T4 slip. Double-check for accuracy.
Non-Taxable Status: PHSP premiums in Box 85 T4 are generally non-taxable, but they still need to be reported.
What is Box 85 on T4 for Employees?
For employees, it’s important to understand what the amount in Box 85 on T4 means:
Not Taxable Income: The amount reported in Box 85 of T4 slip does not count as taxable income. It reflects the premiums your employer paid for your private health services.
Medical Expense Claims: While your employer reports premiums in Box 85 T4, you may still be eligible to claim medical expenses on your tax return if certain conditions are met.
Common Mistakes with T4 Box 85 and How to Avoid Them
To ensure you avoid any CRA issues, be mindful of these common mistakes when reporting T4 box 85:
Not Reporting PHSP Premiums: Forgetting to fill out Box 85 on the T4 slip is a common mistake that can raise red flags with the CRA.
Including Premiums as Taxable Income: Box 85 of the T4 slip is meant for non-taxable benefits. Do not include these premiums in the employee’s taxable income.
Incorrect Amounts: Misreporting the amount in Box 85 T4 could cause issues for both employers and employees with tax filings.
How Muib Khan CPA Can Help with Payroll and Tax Reporting
At Muib Khan CPA, we specialize in helping businesses and individuals navigate the complexities of payroll and tax filings, including accurate reporting of Box 85 on T4 slips and other non-cash benefits. Our services include:
Payroll Management: Ensuring that T4 slips, including T4 box 85, are accurately prepared and filed on time.
CRA Representation: If your business faces a payroll audit due to issues with Box 85 T4, we provide expert guidance and support.
Tax Planning for Employees: Helping employees understand their T4 slips and maximize deductions for medical expenses.
Conclusion:
Understanding T4 box 85 and how to report PHSP premiums is crucial for both employers and employees. Accurate reporting helps avoid audits and fines while ensuring compliance with CRA regulations. If you need assistance with your payroll or tax filings, Muib Khan CPA is here to help. Contact us today to ensure your T4 filings, including Box 85 on the T4 slip, are error-free and CRA-compliant.
Need help with T4 slips or CRA compliance? Book a consultation with Muib Khan CPA and ensure your payroll is accurate and your business stays audit-free.
