LSA reimbursements are generally considered taxable employment income.
Only amounts actually reimbursed are added to taxable income.
Employers are responsible for:
Recording taxable reimbursements in payroll
Calculating the applicable source deductions and employer contributions
Reporting the correct amounts on employees’ year-end tax slips
For taxable LSA programs, the “Reimbursed” column in the “Reports” section shows the amount actually reimbursed to each employee.
Use this amount for payroll and tax reporting. Do not use the employee’s allocation or remaining balance.
Tedy reports can also be scheduled and sent automatically—for example, every two weeks—to align with the employer’s payroll schedule using the “Automated Reports” option at the top right of the reports section.
Employers may manage the taxable portion of benefits in different ways.
Schedule an automated Tedy report to match the payroll frequency, such as biweekly. Add each employee’s exact reimbursed amount to the next payroll.
This option:
Uses actual reimbursements instead of estimates
Keeps deductions aligned with when benefits are received
Avoids large year-end adjustments
Estimate each employee’s expected annual taxable reimbursements spend and divide the amount across scheduled payrolls.
Compare the estimated amounts with actual Tedy throughout and at year-end to make the required adjustments based on actual spend.
This creates more predictable deductions, but employees may use more or less than estimated. The final reported amount must always match actual reimbursements.
Some employers accumulate taxable reimbursements and process them less frequently or near year-end.
This reduces the number of payroll adjustments, but it can create a large deduction from one of the employee’s final paycheques.
Taxable benefits should generally be added to income in the applicable pay period or when received. Employers should confirm this approach with their payroll provider or accounting team before using it.
When Tedy reimburses employees directly, the employer must still record the taxable amount in payroll.
Use Tedy reports to add the taxable benefit without issuing the reimbursement to the employee a second time. The employer’s payroll provider can confirm the appropriate setup.
When Export to payroll is selected, employees are reimbursed through the employer’s payroll.
The employer should ask its payroll or accounting team to create a dedicated taxable benefit code and map it to the Tedy export file. This helps ensure that exported reimbursements are paid, taxed and reported correctly.
Report actual taxable reimbursements—not allocations, unused balances or non-taxable reimbursements.
Box 14: Employment income
Other Information, Code 40: Taxable benefits and allowances
Another T4 code may apply to certain specific benefits.
Quebec employees generally receive both a T4 and an RL-1.
For most LSA reimbursements:
Box A: Employment income
Box L: Other taxable benefits
Another RL-1 box may apply depending on the nature of the benefit.
Before issuing tax slips—or when an employee leaves—the employer should:
Compare payroll records with actual taxable reimbursements in Tedy
Correct any differences between estimated and actual amounts
Confirm that all required deductions and employer contributions have been calculated
Ensure the final amounts are accurately reported on the employee’s T4 and, where applicable, RL-1
For guidance specific to your payroll setup, consult your payroll provider, accounting team or tax professional.
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