Severance Pay
This is indeed a one time expense which will likely appear on Line 130 (Other Income) on your tax return. The proper treatment is to exclude it when its paid in a lump sum. However your regular income should be extrapolated out which it sounds like you are ok with. You just don't want it to look like your income increased. It could look like that because the severance payment plus your regular pay reflects income over a one year period.
This is the third time today I can give our software information. Here it is on Employment Expenses which should help you.
Employment expenses (Sch.III, s.1)
Input the party's tax deductible employment expenses (including GST/HST) that qualify as an adjustment under Sch.III, s.1 of the CSG (T1, all or portion of Line 229. Note that the software will automatically deduct these employment expenses from the party's annual income in the determination of the party's Guidelines Income and child and/or spousal support (CSG, Sch.III, s.1).
IMPORTANT: If there are tax deductible employment expenses that do not qualify as an adjustment under Sch.III, s.1 of the CSG, input these expenses under "Employment expenses (not Sch.III, s.1)".
Certain expenses paid to earn income are tax deductible if the following two conditions apply:
the employment contract required the party to pay them;
the party did not receive an allowance for the expenses, or the allowance received is included in the party's income.
Note that most employees cannot claim employment expenses.
The Income Tax Act (par.8(1)) provides that certain employees are entitled to deduct employment expenses from their T1, Line 150 income. The CSG similarly allow these expenses to be deducted (CSG, s.16; Sch.III, s.1) in the calculation of the party's Guidelines Income:
teachers' contribution to a Teacher's Exchange Fund (maximum $250/year) (CSG, Sch.III, s.1(b));
railway employees’ expenses for meals and lodging (must have Form TL2, Claim for Board and Lodging signed by his/her employer) (CSG, Sch.III, s.1(c));
sales expenses; salespersons are hybrid employees/self-employed, and optionally, may deduct travel expenses only, or sales expenses including advertising, entertainment, promotion, auto and travel expenses, employed sales help, and in some cases, a home office (CSG, Sch.III, s.1(d));
transport employees' expenses; employees tranporting goods and/or passengers may deduct their lodging and part of their meals while away from home (CSG, Sch.III, s.1(e));
travel expenses, including applicable meal and lodging, if employee travels and is required by contract to pay for his/her own food and lodging (CSG, Sch.III, s.1(f));
motor vehicle travel expenses, if employee travels and is required by contract to pay for his/her own automobile expenses (CSG, Sch.III, s.1(f.1);
dues and other expenses of performing duties required by employment contract (Note: do not include any union, professional or like dues that have already been input as a tax deduction under "Union, professional or like dues") (CSG, Sch.III, s.1 (g));
motor vehicle and aircraft costs, including applicable interest and capital costs, for vehicles required by the party in the performance of their duties (CSG, Sch.III, s.1(h));
CPP contributions and EI premiums paid by the party on behalf of an individual employed by the party as an assistant or substitute. (Note: do not deduct the employed party’s own CPP and EI) (CSG, Sch.III, s.1(i));
salary reimbursement for a period when the party did not perform duties and therefore had to payback income (CSG, Sch.III, s.1(j));
forfeited amounts under an applicable salary deferral arrangement (CSG, Sch.III, s.1(k));
musical instrument costs, including applicable capital, insurance, rental and maintenance costs for an instrument required by the musician party in order to fulfill his/her duties (CSG, Sch.III, s.1(l));
artists' employment expenses pertaining to earning an income from a dramatic, musical or literary work; artist may need to be a member of a certified professional artists’ association (CSG, Sch.III, s.1(m)).
Employment expenses (not Sch.III, s.1)
Input the party's tax deductible employment expenses (including GST/HST) that do not qualify as an adjustment under Sch.III, s.1 of the CSG (T1, all or portion of Line 229.
IMPORTANT: If there are tax deductible employment expenses that do qualify as an adjustment under Sch.III, s.1 of the CSG, input these expenses under "Employment expenses (Sch.III, s.1)". For a full list of what employment expenses qualify as an adjustment, see the help under "Employment expenses (Sch.III, s.1)".
Other employment expenses that do not qualify as adjustments under CSG, Sch.III, s.1 include:
legal fees paid to collect or establish a right to salary or wages (less any amount awarded in respect of those fees).
