repayment of expenses

Allocation of settlement funds in wrongful dismissal – between taxable and tax exempt

October 23, 2012 Earl Altman Employment/Labour Standards, Human Resources, Payroll, Pensions and Benefits, Source Deductions and Reporting, Wages and Compensation

Damages for wrongful dismissal are intended primarily to compensate the dismissed employee for income lost due to the dismissal. As such, the amount of such compensation, whether as a result of a settlement or a judgment by the court is, prima facie, taxable.

Canada Revenue Agency, compensation, contribution room, dismissed employee, EI benefits, employment insurance benefits, employment law, general damages, income lost due to the dismissal, Income Tax Act, legal fees, Notice of Assessment, repayment of expenses, retirement allowances, RRSP contribution room, Service Canada, settlement, settlement or a judgment by the court, statement of claim, wrongful dismissal