Management Bonus and GIFI code

Tax Topics
1

A SH produced a year-end management bonus - December 31, 2019 (did not pay it out just the payroll remittance portion)

  1. Bonus must be paid out within 6 months (June 30, 2020) to be included in 2019 as an expense otherwise it will be added back to income.

  2. GIFI code - where does this bonus amount go?

  • Salaries and wages 9060

or

  • Bonuses 9063

Can anyone confirm the first point and mention the correct GIFI code? Thanks

2

Actually, the bonus must be paid within 180 days after the year-end (take the leap-year into account for this). For accelerated remitters, this could be an issue. I normally include management bonuses with salaries and wages. It depends on how detailed you want your GIFI to be.

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3

If the payroll deductions were paid for December, you don’t have a bonus payable. It’s already been paid when the deductions were recorded. You have a credit to S/H loan. Bonus, with related deduction should have already been on a 2019 T4. Deductions on a bonus are never recorded 6 months in advance. If a T4 wasn’t generated, then the T4 Summary would have been over-remitted by the amount of those December deductions. Even if the client could worm his way out of the first problem, a Dec.31/19 bonus had to be paid by June 28.

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4

“A SH produced a year-end management bonus”

Yes, well, I don’t understand that at all, as that would seem to be legally impossible.?

Shareholders are not entitles to “bonuses” - they may be entitled to DIVIDENDS, and then ONLY IF the corporation’s records show that a RESOLUTION has been passed declaring those dividends.
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So presumably you intended to say something else…
Perhaps you meant to say that an employee President or an employee Director received an amount on account of PAYROLL.
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Do the bookkeeping records record this amount of PAYROLL?
Are the bookkeeping records correctly backing up the Accounting Financial Statements so produced?
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Also, way back in February, as jhd.hemeon mentioned, how does the remitted T4 and T4 summary for tax year 2019 reconcile? Is the T4 summary correct?
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GIFI does not drive this issue, since GIFI must instead flow from the correct issued Financial Statements.
One first has to make sure the T4 summary reconciles and is corrected, and then the Financial Statements have to be corrected so that they reconcile with the bookkeeping records.
Following which, the GIFI code should become self-evident.
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So, I would suggest that a summary might be:

  1. First the bookkeeping has to be corrected
  2. Also the T4 summary for 2019 tax year should be checked and/or corrected
  3. Then corrections and adjustments to the Financial Statements need to be made as/if required
  4. When the FS are corrected, reviewed, and signed off on, then the corporate T2 preparation can be prepared
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Thank you - I am grateful for your replies!