Is Terminally Ill Pay Taxable in Toronto?

Terminally Ill Pay

One of the things that can make or break your small business is the terms you have with your employees. There are many things that can happen at the work place and one of them is that an employee could be terminated. When this happens an individual will need to determine what is termination pay taxable in Toronto. The first thing you want to do is talk with your accountant if you have one. They can tell you how much it is going to cost you because there are many factors to consider.

The most important thing is the employees gross salary. This is the amount of money they bring in each pay period. You need to know if the severance pay is for a fixed or variable rate. A variable rate can mean a higher payment at the end of the year but it can also mean that you can get more deductions on the money you pay out. You will find that with a fixed rate termination pay it is more affordable. The best way to go about getting the information you need is to ask your accounting department.

There will also be other taxes you need to look at. The Toronto income tax rate for a salaried person is 40% on the entire pay period. You need to take this into consideration when deciding if it is a good decision to terminate someone. Some employers are so afraid that a terminated person will run away to Canada that they will pay the tax even though the person has not actually left the country. The tax is still due even if the person is not in Canada anymore.

Is Terminally Ill Pay Taxable in Toronto?

If you find that you will have to pay tax on the termination pay then you need to also determine if there is a way to make that person get another job with the company before being terminated. Some companies allow you to have money deposited into a savings plan for a specified period of time after the termination. You should check with your human resources department to see if this is allowed for a terminated employee.

A last example would be if the person has been employed with the company for many years and is being terminated. It would be a good idea to take that money and put it into an IRA so that you can save it for retirement. If you are concerned that you might have to pay money tax on a terminated pay period then you should consult with a professional accountant. You can usually find one in the phone book or online with some good search engine results. It pays to do your homework and find out what is covered under each set of rules.

terminally ill pay is a very complicated subject in Toronto. The rules and regulations can change at any time and you need to stay informed. If you need more information then you can get more information from your accountant or anyone else that is qualified to answer your questions. Just remember if you need more help with regards to Terminally Ill pay then you may need to find a qualified professional to give you their advice.