Reimbursements made through a Lifestyle Spending Account (LSA) are generally considered taxable benefits.
Employers are responsible for recording them in payroll, applying the required deductions and contributions, and reporting them on employees’ tax slips.
For taxable LSA programs, use the amounts actually reimbursed to employees, rather than their available allocations or unused balances.
In Tedy, the “Reimbursed” column in the “Reports” section shows these amounts.
You can also schedule reports to match your payroll calendar using the “Automated reports” option at the top right of this section.
Taxable reimbursements should generally be accounted for in the pay period in which they are received.
The process depends on the reimbursement method:
Reimbursements through Tedy: record the taxable amounts in payroll without paying employees a second time.
“Export to payroll” option: use the Tedy export file to pay reimbursements through your payroll and apply the appropriate tax treatment.
Reported amounts should reflect the taxable reimbursements actually paid during the calendar year.
They are generally included:
On the T4: in box 14 and under code 40 in the “Other information” section.
On the RL-1 slip, where required: in boxes A and L.
Other boxes or codes may apply depending on the type of benefit and applicable contributions.
Regularly reconcile your Tedy reports with your payroll records, particularly at year-end or when an employee leaves, to identify and correct any discrepancies.
This article outlines the general rules for taxable LSA reimbursements. Treatment may vary depending on the program and the expenses reimbursed.
