CVITP Assist: Tips

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CVITP Assist: Tips

TIPS

Controlled tips vs. direct tips:

Controlled tips:

These are tips an employer controls or possesses and then pays to employees.
For example, tips turned over to the employer and then distributed to employees.
They are reported on T4 slips, box 14.
They are included as part of employment income in determining CPP contributions and EI premiums.

Direct tips:

These are tips paid directly by a customer to an employee, if the employee keeps them.
It doesn’t have to be cash. A direct tip includes one given by credit or debit if the employer returns the full tip to the employee at the end of the employee’s shift.
They are not reported on T4 slips.
They are not included in determining or calculating CPP contributions^[1] or EI premiums^[2].
They are required to be reported as “other employment income” on a tax return, line 10400.

UFiles steps for direct tips:

On the left, click T4 and employment income
Click the + next to Tips, and enter the amount received

Tips received by gig workers:

Gig workers, such as an Uber Eats driver, are self employed. Tips are considered regular business revenue just like any other payments received by the person.

References:

[1] For CPP, there is no explicit exclusion for direct tips in any statute or regulation. Administratively, the CRA considers direct tips as falling outside of employer-paid remuneration and therefore not part of “contributory salary and wages”.

[2] For EI, the Employment Insurance Regulation 97-33, s.2, states the insurable earnings includes “the amount of any gratuities that the insured person is required to declare to the person’s employer under provincial legislation”. In Ontario, the CRA considers that direct tips are not required to be declared to an employer.