Errors in the Phoenix pay system used by the employer resulted in employees being overpaid and/or underpaid in 2016 or 2017, and their T4 tax slips being incorrect. The employer will reimburse for the cost of tax advisory services provided by an accountant to help the employees understand the impact of such errors on their 2016 or 2017 income taxes, prepare their 2016 or 2017 income tax return in cases where their income tax situation has been affected by the errors, and reconcile income reported on an employee’s 2016 or 2017 tax slip against income actually received by the employee. CRA stated:
Generally, compensation paid to an employee by their employer for financial loss incurred due directly to the employer’s error is not included in income since the employee is being restored to a previous economic position. Therefore, reasonable employer reimbursements for the cost of tax advisory services incurred as a direct result of Phoenix pay system errors will not be included in the employee’s income and will not have to be reported on the employee’s T4.