Jessica Wilson, born and raised in Ottawa, went to Carleton University for a Bachelor of Mathematics with a concentration in Statistics. During her degree she opted into the co-op program and did an 8-month internship as a Data Analyst for QNX Software Systems (a supplier of commercial operating systems, hypervisors, development tools, support and services) and a 4-month internship as a Sales Representative for Lightspeed (an all-in-one cloud-based point of sale system).

Jess was pleasantly surprised when both companies reached out to offer her a full time position starting in January 2020. She has one week to decide which offer to take but they’re so different she is having trouble deciding. Jess has come to you and asked for your assistance.

Required:
A) Using the information provided below, calculate the minimum Net Employment Income that Jess would need to report on her 2020 tax return for each job offer.

QNX Software Systems Offer & Estimates:

• Jess would be paid a salary of $95,000 per year.

  • This will result in the maximum CPP and EI deductions.

• Her bonus for work performed in 2020 will likely be approximately $12,000. QNX will pay half her bonus in November 2020 and the other half in February 2021.

• Jess must contribute 3% of her base salary for union dues each year.

• QNX will deduct $780 / year for long term disability insurance from her paycheques. To lessen the financial burden on Jess, they will add an additional $780 / year to her paycheques to make up for this.

• QNX will provide a life insurance policy worth 5x base salary. The premiums are $500 / year and entirely paid for by QNX.

• Because she isn’t able to secure parking anywhere near the office on such short notice, she will have to Uber to work and home for the month of January. Jess estimates the total cost to be $800. From February to December she will pay QNX $100/month to park in the lot outside of the building. Jess is pleased because they charge other people $200/month to park there.

• Sometimes Jess will be required to travel to various clients around Ottawa. To compensate for this, QNX will pay a car allowance of $6,000 / year to account for gas, wear and tear on Jess’s vehicle, etc. Jess estimates that her total cost of using her car for personal and business use will be:

  • Gas: $4,000

  • Interest on car loan: $3,900

  • Maintenance: $5,000

  • Parking: $1,100

• Jess told QNX that she’s interested in pursuing her CPA designation and asked if they would be willing to pay for her CPA exams. QNX agreed to pay a maximum of $2,300/year towards these exams. She expects to enroll in 3 CPA exams in 2020 costing a total of $4,200.

Lightspeed Offer & Estimates:

• Jess would be paid a salary of $85,000 per year.

  • This will result in the maximum CPP and EI deductions.

• Her bonus for work performed in 2020 will be calculated based on the company's year-end financial results and will be paid in March 2021. Jess expects her bonus to be approximately $25,000.

• Jess will receive commissions on sales she makes. She expects to receive a total of $15,000 of commissions in 2020.

• Jess expects she will need to spend $17,000 for hotels, flights and meals while travelling on company business in 2020. Lightspeed will reimburse Jess for all of these expenses.

• Lightspeed will provide Jess with a vehicle. They will purchase the vehicle for $35,000. They will pay for all operating costs regardless of whether Jess uses the vehicle for business or personal use.

• Recognizing Jess is a recent graduate from University and doesn’t have much money, Lightspeed will provide her with a 5 year loan of $100,000 at an interest rate of 0.5% to help her get her life started. Interest is due to the company on December 31 each year. Principal is payable at the end of the 5 years.

• Lightspeed does not have a large office space and thus they require Jess to work from home 3/5 days per week and thus she has to perform all of her duties out of her home office on these days. Jess’s home is 1,800 square feet and her home office takes up approximately 270 square feet. She doesn’t use this space for anything other than working from home. Below are some of Jess’s expenses related to her home:

  • Painting the home office room $500

  • Home insurance $1,500

  • Property taxes $4,500

  • Hydro $1,300

  • Water $480

  • Kitchen renovations $11,000

  • Gas $950

  • Mortgage interest $12,000

• Jess asked Lightspeed if they would pay for her CPA exams and they said no; however, they said they would pay for her to attend a sales conference taking place in Las Vegas during the year run by a non-profit company based out of Las Vegas. The conference fees, travel costs, etc will cost Lightspeed approximately $4,000.

• The Lightspeed office is on the other side of town so she will move from Downtown to Kanata if she accepts this job. Moving expenses will likely cost $5,000.

Other Information:

• Assume the prescribed rate of interest remains a steady 1% during 2020 (i.e. do not use your tax appendix for this).

• Regardless of whether Jess uses her own car (with QNX) or the employer's car (with Lightspeed) she plans to drive approximately 14,000km for personal use and 5,000km for business use during the year.

• Under either option Jess will purchase her own business cards for $100.