TaxCycle | Products | Pricing | Training | Documentation | Support | News

Income paid to mentally challenged

Has anyone prepared T1s for an individual who receives income from a non-profit organization that “employs” mentally challenged people? This is the first time I’ve seen it - the organization provides a letter stating total income for the year ($1,200) but no slip of any kind. The individual’s caregiver says the organization has never provided a T4 or anything. The individual spends 20-30 hours per week at the center (Kinsmen Workshop) doing tasks like shredding paper, and gets “paid” $100/month.

I’ve been searching, and can’t find anything on “employment-like” income that does not require source deductions, except for “casual labour” up to $500 per year.

Does anyone know whether there is some kind of exemption for mentally challenged people, or some exemption due to the nature of the non-profit organization that employs them?

Line 10400 or line 13000

This is quite normal in my end of the country… I just add as Other employment income and correct T4 never issued.

Thanks @David_R_Officer and @rachelavryl, but I wasn’t asking how to report it on the T1 (I have it on line 13000). I was wondering why the issuing organization is allowed to pay what seems to be “employment income” without having to withhold source deductions. Any idea?

Kind of wondering if this same concept could be used by another non-profit org (which is a client).

We pay students that work for the summer camp an honorarium and issue a T4A if the amount is $500 or over. We also hire students as waterfront director and to work in camp office. They have specified working hours and are paid an hourly wage reported on T4. We have been paying the honorarium for more than 10 years but only in the last five years have we been issuing T4As. The students that receive the honorarium have a different type of contract or arrangement with the camp - it is a Bible Camp so they are actually volunteers that receive a gift from camp that honours the work they do without actually paying them a wage. It is a voluntary gift given by the camp - it isn’t a contractual requirement.

I have also learned to avoid using “Other Employment Income” if at all possible. If they report no employment income, it is difficult to have other employment income. I have been asked to provide detail in a post-assessment review for amounts on this line.

1 Like

My understanding from
is that it is not really income as much as it is something to help with their self esteem… ie that the work they do matters. Most of these individuals are living off of some type of social assistance, group home or stil with parents and these “jobs” are setup to give them something productive to do with their days and to provide them with structure and supervision after they are no longer in public school system.

Without this facility a caregiver would be required in most cases.

The facilities themselves do issue T4s to employees. The supervisors and managers are the employees.

Hope this helps

1 Like

I considered that. In most cases, you would pay an honorarium to someone who is doing a single job (like speaking at an event), so it wouldn’t be anything like “employment”.
But, according to CRA, you are supposed to withhold source deductions from honorariums, too:

1 Like

Yes, that’s why the organization exists. I’m not saying it’s wrong. Just wondering what part of the ITA this falls under. I’ve been trying to contact the org but they are shut down due to COVID-19, and not returning my calls.

I have the exact case that you are referring to Nezzer. A client with downs syndrome is working at Grocery store and they pay her an hourly wage, deduct CPP, EI and Inc tax. They issue her a T4 . She also receives a social benefit. Thus, when I do her Taxes she also qualifies for a WITB. Nezzer you are correct in saying a T4 should be issued. No such things as Honorarium etc for this situation.
Hope this helps

1 Like

“Honorariums from employment or office” from the link referred to by Nezzer.

The honorarium that we pay are not from employment or office but for a voluntary position. They volunteer for a week or sometimes several weeks for a particular camp session. In that sense it is similar to the speakers that speak one time at a camp sessions. (Of course the speakers who are mature men and women receive as much or more for one engagement than a student would who volunteered all summer.)

“The honorarium that we pay are not from employment or office but for a voluntary position”

Sounds very similar to: “I should not be taxed because I am a “natural human” and not subject to the laws of the planet or universe set by Man”

“volunteer” - “a person who works for an organization without being paid”

Yes, that’s what I meant, Osiah - volunteer workers at a Bible camp would only be a for a short duration, and then you may never see them again (it’s not ongoing). But, with my client, they have been “working” at this center for years, several hours every week. I know they may be socializing more than working, but I just wonder if they have a special work classification or something. Maybe the org considers it like an honorarium, but doesn’t realize they should be filing T4A slips?

"The honorarium that we pay"*

Guide RC4120
(Employers’ Guide - Filing the T4 Slip and Summary)
Box 14 – Employment income
Report the total income before deductions. Include all
salary, wages (including pay in lieu of termination notice),
bonuses, vacation pay, tips and gratuities, honorariums,
director’s fees, management fees, and executor’s and
administrator’s fees received to administer an estate (as
long as the administrator or executor does not act in this
capacity in the regular course of business).”

Guide T4001
“Employers’ Guide - Payroll Deductions and Remittances”
Deducitions from paying: Honorariums
CPP contributions - Yes
EI premiums - Yes
Tax deductions - Yes

A T4 confirms employment which would trigger employment standards like minimum wage, etc.

It’s more like a stipend which is usually paid to enable someone to work who is usually unpaid.

1 Like

If it actually WAS completely unpaid, then the payor would be completely safe from the requirement to issue a T4, and the payee would be completely safe from not reporting the $0 amount received as income.

[OED: stipend: n noun
_ a fixed regular sum paid as a salary or as expenses to a clergyman, teacher, or public official. "]

True @helga_spence. Of course, that’s the reason we HAVE employment standards - people who work for an employer should be paid a fair wage. In this case, as @rachelavryl pointed out, it’s not so much about “work”. But, that does answer my earlier question - why the org doesn’t withhold and remit source deductions. Thanks for that. I know it sounds like I’m waffling a bit here but just trying to figure out the rationale (while I can’t get an answer from the org staff).

Apparently the NPO did not read the CRA guides.

Perhaps they have written or other Employment contract documentation which may be informative to read.

In any event, reporting of employment income for the recipient taxpayer is clear in the ITA.
Even if the amount is $499
See Section 6.

Merriam-Webster dictionary:

Definition of stipend
a fixed sum of money paid periodically for services or to defray expenses

Merriam-Webster dictionary:
> Definition of stipend
> a fixed sum of money paid periodically for services or to defray expenses

[OED: stipend: n noun
_ a fixed regular sum paid as a salary or as expenses to a clergyman, teacher, or public official. "]

This mentally challenged clergyman, teacher, or public official employee had $1,200.00 of expenses, and no income?

Sure, OK, if backed up by the employment documentation, employee duties, and the expense receipt documentation…

I have an adult client with cerebral palsy. For many years he worked at a local lumber yard (truss manufacturing division), but was paid through the local Community Living Association without any type of year end slip… all he would bring me was cheque stubs. I tried to advocate for him several times over the years, as he was being paid around $6.00 per hour, and always owed CPP on his T1 return, because I could only report on a T2125. He earned about $9,500 per year as per the Community Living cheque stubs. They would never tell us how much the Lumber Yard paid to Community Living.

About 5 years ago the CRA (or Ministry of Labour?) came in and decided they need to abide by proper employment standards, including rates of pay and the issuing of T-slips to their clients/employees.

Long story short, he is now employed directly by the lumber yard and earns close to $40,000 per year. They say he is one of their best employees, and he also loves his job (which is exactly the same job he was doing for the 15 or more prior years). His confidence and self esteem has dramatically increased.

In any event, it seems someone decided that less than minimum wage and non issuance of T-slips etc were just not acceptable, even for the charitable organization who’s function is to help those who are handicapped.

Instead of owing CPP every year now he gets large annual tax refunds… so I look good too. :slightly_smiling_face: