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Income tax treatment: Earned income at year end paid in the new year?

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  • Nov 13th, 2009 7:46 pm
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Apr 19, 2008
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Income tax treatment: Earned income at year end paid in the new year?

I had a few temp. jobs here and there, so I was wondering if I worked at year end (but paid at the beginning of next year), it will still count for 2009's income, correct?
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Mar 23, 2004
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segadcsonic wrote:
Nov 13th, 2009 12:22 am
I had a few temp. jobs here and there, so I was wondering if I worked at year end (but paid at the beginning of next year), it will still count for 2009's income, correct?
yes, if u earned income at 2009 but it wasnt paid until 2010, it will still be counted as 2009 income. What matters is when u earn it instead of when u are paid...at least thats how i will look at it accounting wise.
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angel_wing0 wrote:
Nov 13th, 2009 12:36 am
yes, if u earned income at 2009 but it wasnt paid until 2010, it will still be counted as 2009 income. What matters is when u earn it instead of when u are paid...at least thats how i will look at it accounting wise.
Are you an accountant?

Seems to me it would make the most sense to declare the income in the year listed on the T4(s) you receive from your employer(s).

But maybe that's too obvious to be correct...
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segadcsonic wrote:
Nov 13th, 2009 12:22 am
I had a few temp. jobs here and there, so I was wondering if I worked at year end (but paid at the beginning of next year), it will still count for 2009's income, correct?
You will be getting your T4 slip or slips from all your employer's in approximately Feb 2010 so whatever is mentioned on it you will have to report as your 2009 income .
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grant wrote:
Nov 13th, 2009 1:11 am
Are you an accountant?

Seems to me it would make the most sense to declare the income in the year listed on the T4(s) you receive from your employer(s).

But maybe that's too obvious to be correct...
...nop u are exactly correct as well :lol:
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The amounts will appear on your T-4 in the year that you were PAID not earned.

So if you worked for a week from Dec 25 to Dec 31, 2009 and you were paid on Jan 2, 2010 (pay cheque dated Jan 2), your pay would appear on your 2010 T-4 and you'll pay 2010 taxes on it.

CRA does not care when you earned it.

And yes, I am a professional accountant.
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agent86 wrote:
Nov 13th, 2009 10:02 am
The amounts will appear on your T-4 in the year that you were PAID not earned.

So if you worked for a week from Dec 25 to Dec 31, 2009 and you were paid on Jan 2, 2010 (pay cheque dated Jan 2), your pay would appear on your 2010 T-4 and you'll pay 2010 taxes on it.

CRA does not care when you earned it.

And yes, I am a professional accountant.
Last year I did some work with a friend's consulting company. Because in the same year I'd received a large severance package, I asked around if it was possible to ask to delay payment until this year to reduce my taxes, but I was told what mattered was when the income was earned, not when it was paid. Because this was contract work, there was no T4 though.
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agent86 wrote:
Nov 13th, 2009 10:02 am
the amounts will appear on your t-4 in the year that you were paid not earned.

So if you worked for a week from dec 25 to dec 31, 2009 and you were paid on jan 2, 2010 (pay cheque dated jan 2), your pay would appear on your 2010 t-4 and you'll pay 2010 taxes on it.

Cra does not care when you earned it.

And yes, i am a professional accountant.
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AllWheelDrift wrote:
Nov 13th, 2009 1:18 pm
I was told what mattered was when the income was earned, not when it was paid. Because this was contract work, there was no T4 though.
contract work, no T4 - is business income and this is generally taxed on the accrual basis therefore taxed when earned.
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Oct 8, 2008
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AllWheelDrift wrote:
Nov 13th, 2009 1:18 pm
Last year I did some work with a friend's consulting company. Because in the same year I'd received a large severance package, I asked around if it was possible to ask to delay payment until this year to reduce my taxes, but I was told what mattered was when the income was earned, not when it was paid. Because this was contract work, there was no T4 though.
kaycee8877 wrote:
Nov 13th, 2009 2:04 pm
contract work, no T4 - is business income and this is generally taxed on the accrual basis therefore taxed when earned.
Yes, contract work performed as an independent contractor is considered business income, but just because you work under contract does not mean you are a contractor for tax purposes. You can easily have a short-term contract and be considered an employee for tax purposes and thus earn employment income. At the same time you can work at a company 'full time' and still be a contractor and earn business income.

Employment income is taxed when recieved, but there is one exception. If income is receivable to you in a given year and you ask for the payment to be deferred until the next year, under the constructive receipt principle, that amount will be taxable in the current year. So for example:

In December 2009, if your company says to you 'here is a bonus for all of your hard work' and they are basically ready to pay you right now, but you ask for payment to be deferred to January 2010 (trying to defer some taxes), and even if it is then paid in January, the bonus amount will still be taxable in 2009 because you were entitled to receive it in 2009 and you acted to prevent the receipt.

If on the other hand in December 2009 your company says 'we will pay you a bonus in January 2010', then that amount will be taxable in 2010 because you were not entitled to receive the bonus in 2009 even though you know about it.
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