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
Is it necessary for me to fill out the TD1 or TD10N form every
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.