PF1 Exam Dumps - Payroll Fundamentals 1Exam

An expense reimbursement is paid to repay an employee for actual business expenses the employee incurred while performing their job (for example, meals while travelling on business, supplies purchased for work, etc.). CRA’s taxable benefits guidance distinguishes reimbursements from allowances: an allowance is usually a predetermined amount paid without the employee having to support the expense with receipts, while a reimbursement is tied to actual costs.

That distinction matters because reimbursements are generally not compensation for work performed (so they are not “earnings”), and they are not “benefits” in the sense of a good or service provided by the employer (though CRA notes that benefits can include reimbursements of personal expenses—so payroll must still ensure the reimbursement is for business use and properly supported).

Option A correctly describes reimbursements. Option B is typically an allowance (for example, a vehicle allowance for using personal property). Option C describes earnings (wages/salary). Option D describes benefits (value of something provided or paid for on the employee’s behalf).

A defined benefit (DB) pension plan promises a future pension benefit based on a formula (for example, service and earnings). Because the benefit is defined, the plan must ensure it is adequately funded to meet future liabilities. That requires actuarial valuations—professional studies that forecast future obligations and determine required contributions. Regulators describe DB plan funding as being based on actuarial calculations and require administrators to file actuarial valuation reports to establish funding and contribution requirements.

A defined contribution (DC) plan does not promise a specific future pension amount; contributions are defined, and the retirement outcome depends on investment performance—so it does not require the same ongoing actuarial funding valuations for promised liabilities. An RRSP is an individual savings plan, not an employer DB plan requiring actuarial funding reports.

Therefore, the correct answer is Defined benefit pension plan (option A).

“Net taxable income” for payroll withholding purposes is the amount of income on which income tax is calculated for the pay period. It generally starts with the employee’s gross taxable earnings for the period (regular wages plus any taxable benefits/allowances that must be included in income), then subtracts only those deductions that are deductible for tax at source (for example, certain registered pension plan contributions, union dues, etc., if applicable). A cash taxable benefit is treated like additional remuneration and is included in taxable income. (canada.ca)

Here, Anthony’s weekly taxable earnings are:

$750.00 wages + $25.00 cash taxable benefit = $775.00.

Being exempt from CPP contributions affects whether CPP is deducted, but CPP is not a “net taxable income” subtraction in this question (and in any case, no CPP is being deducted). The question also does not mention any other tax-deductible payroll deductions (like RPP contributions), so there is nothing to subtract from taxable earnings.

Therefore, Anthony’s net taxable income for the week is $775.00.

For payroll withholding, income tax is calculated on taxable income for the pay period, so only deductions that are income-tax deductible (or otherwise reduce taxable income at source) will reduce the employee’s taxable base for withholding. Employee contributions to an RRSP are generally deductible for the employee, which is why payroll-deducted RRSP contributions (such as contributions to a group RRSP taken off the paycheque) reduce the amount of income tax withheld when the payroll system is set up to treat them as deductible contributions. The CRA confirms that deductible RRSP contributions can be used to reduce your tax.

By contrast, paying provincial health care premiums (where applicable) and paying an employee share of group benefit plan premiums are not automatic “reduce taxable income at source” deductions in the same way for payroll withholding; they may be personal expenses and, depending on the plan/premium type, may only affect the employee’s personal tax situation through credits/deductions when filing, not the standard payroll withholding base. Therefore, the only correct choice is A.

The CRA defines a death benefit as the gross amount of any payment made on or after the death of an employee to recognize the employee’s service in an office or employment. It can be paid to a surviving spouse/common-law partner, heir, or the estate.

This is different from amounts the employee already earned before death (for example, regular wages up to the date of death, or vacation pay that was accrued/earned). CRA guidance treats wages and employment income earned up to and including the date of death as amounts to be reported on a T4 slip, not as a death benefit.

It’s also different from a life insurance payout from an insurer (which is not an employer-paid “death benefit” for payroll reporting purposes). The payroll impact is that a qualifying death benefit is generally reported as a special payment (often on a T4A), following CRA rules for deductions and reporting of death benefits.