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Federal and Provincial Tax Information

To obtain current income tax rates, as well as general information on federal and provincial taxes, please visit the Canada Revenue Agency website at: http://www.cra-arc.gc.ca/tax/individuals/menu-e.html


What is aTD1 and TD1ON form?
A TD1 form is the federal personal tax credits return.The TD1ON is the provincial personal tax credits return. These forms are required in order for payroll to determine the rate of tax used to calculate payments to the employee. It lists, with a short explanation of each, the credits allowed for individuals (e.g. basic personal amount, spousal amount, age amount, tuition fees and education amount, etc.).

Is it necessary for me to fill out the TD1 or TD10N form every year?
It is not required that the TD1 or TD10N is completed each year if an employee's personal tax credits amount has not changed for the year. However, if an employee's situation has changed and more or less credits are available, they must fill out these form out again in order for payroll to implement the changes.

If I have more than one employer at the same time, am I required to fill out a TD1 and TD1ON for each and every employer?
Each place of employment should have a completed TD1 and TD1ON form. It is important to remember to only take the personal credits once. For example, if an individual marks the basic personal amount of $6456.00 at two places of employment, the two companies, taken together, are reducing the employee's total taxable income by $12,912.00 (6456.00 x 2) for purposes of determining the amount of tax to withhold. However, when the employee is completing the tax return for filing, only $6,456.00 will be subtracted from their employment income to calculate the tax owing.

How do I increase my tax deductions or change my amount of federal or provincial tax credits?
If an employee needs to change the amount of personal tax credits used in the calculation of their tax rate used by payroll, a new federal TD1 or provincial TD1ON form must be completed, signed, and submitted to the payroll department. There is also a section on each form that allows for a flat additional amount of tax to be taken with each payment to the employee.

If I receive a payment that is directly transferred by my employer to an RSP plan, will it still be declared as income?
Yes. All income from an employer to an employee must be declared. If an employee chooses for an employer to transfer a payment (for example, a retiring allowance) directly to an RSP, it is still a payment from the employer to the employee. The RSP financial institution will then be required to send the appropriate tax slip to the employee for the employee to include with the annual personal tax return.

If I receive a retro payment for previous calendar years, in which year will it be declared as income?
Revenue Canada requires that payments are declared as income in the calendar year in which they are received. This is regardless of the year or years for which it is a payment. ( The qualifying retroactive lump-sum payment announced in the February 1999 budget does not include employment income payments received as a result of normal collective bargaining.)

Why is the rate of tax taken off of a retro payment higher than my normal rate of taxation?
The tax deducted from a retroactive payment to an employee is calculated by the bonus tax method, as required by Revenue Canada. The employee does not pay "extra" tax that will be received back upon T4 filing. If this retroactive payment were distributed for payment to the employee over all of the year with the regular payments, overall, the same amount of tax would be paid by the employee as with this method. It is higher than the rate of taxation for regular payments because the tax rate is the tax percentage "at the margin," whereas for the regular payments, the tax is calculated on an annualized basis. On the annualized basis the federal tax percentages of 17, 26, and 29 (with the accompanying percentage of federal tax for provincial tax calculation) are all used.

 

 

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