A taxpayer had a small part-time server position.
She made a few hundred dollars in tips.
Tips entered at the bottom of the T4 slip on the last line (Tips and other employment income not reported on slips).
I’m getting a diagnostic:
Other employment earnings such as tips have been reported. Consider entering these amounts on CPT20 to pay additional CPP contribtuions.
Is this mandatory?
I entered the tip amount in two places on CPT20 (Line 13 and Part B - Other employment earnings)
Is this how others have recorded tips?
I find that area of the T4 is a really convenient place to enter the tips.
CPT20 is optional depending on whether the client wants to make CPP contributions on their tips.
I will check if the taxpayer wants to make CPP contributions on her tips.
Assuming she doesn’t - I could just delete the inputs I made on line 13 and Part B and then can I leave the diagnostic as is with no further steps?
@snoplowguy Appreciate the reply.
or just put the tips on line 130
I also use the bottom row of the T4 slip tab to add TIPS, which then places the TIPS on Line 10400, although I have also placed them directly on Line 10400 too.
It’s better placing TIPS on Line 10400 vs Line 13000 so they are treated as Employment Income where they can add to the client’s RRSP contribution room for the following year. You don’t earn RRSP contribution room on income placed on Line 13000.
I haven’t had any clients wanting to add CPP on their TIP income, so often don’t even mention the option to them. I did, however, applying CPP on my own 2022 taxes from Tip income I received in my tax business.
I personally would not include tips on line 13000 because they don’t belong on that line. Tips are considered to be earned income and are to be reported on line 10400.
You can enter the tips directly on line 10400 or on the “Income worksheet”, but TaxCycle has an ingenious way of entering tips. The software allows you to enter tips at the bottom of the T4 input screen so you can actually match the tips received to the T4 where the person might have received the tips. Reporting tips on the bottom line of the appropriate T4 slip will correctly flow that amount properly to line 10400 (not 10100).
Also, as @kozakworld has mentioned, reporting Other employment income on the line specifically available for Other employment income allows for other goodies such as the addition of RRSP contribution room, optional CPP contributions, and the line 31260 Canada employment credit if the maximum has not already been reached with some other source of employment income.
Where the self-employed client (Uber or the likes, food delivery service) with no T4 but a year-end statement detailing:
Amount earned: $xxxxx
I’m considering adding both amounts to his “Gross Sales, commissions and fees” on his T2125.
Trying to explain a 24 year old the long term CPP benefit when he has a small amount due instead of a refund is no easy task.
Tips earned by virtue of being self employed are considered to be income from that self employment.
Thank you all for your helpful replies. I really appreciate it!