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New Provincial Taxation: Tax-On-Income

On January 1, 2001, the Canada Customs and Revenue Agency (CCRA) introduced a new method for calculating provincial personal income tax based on taxable income. This new tax method referred to as TONI (Tax-on-Income) enables each province to determine a separate tax rate and establish a separate personal tax credit. In the former tax-on-tax system, the provincial personal income tax was calculated as a percentage of the basic federal tax. With the new TONI method, provincial tax is calculated by applying provincial tax rate(s) to the taxable income amount.

With the introduction of this tax method, there are now two separate TD-1 forms to be completed. One form is for provincial tax credits called the TD1ON ONTARIO PERSONAL TAX CREDITS RETURN. The other form is for federal tax credits called the TD1 Personal Tax Credits Return. Although the total income on which you are taxed is the same for both federal and provincial tax calculations, the basic personal tax credit and the amount of credit you can claim under various categories on the TD1's is now different.

Who should complete a federal Form TD1?
A general re-filing of the federal TD1 form is not required every year if no changes occur from the previous filing. However, all employees and/or pensioners who wish to change their federal claim amounts must complete the Federal TD1 form.

Who should complete a provincial Form TD1?
All new employees or pensioners must complete the Provincial Form TD1. A general re-filing of the provincial TD1 form is not required every year if no changes occur from the previous filing. However, all employees and/or pensioners who wish to change their provincial claim amounts must complete the Provincial TD1 form.

What happens if I don't complete a new provincial/federal Form TD1?
In the event that you do not complete both TD1's, the employer is required to enter the basic personal tax credit amount.

The TD1 forms are available from the HRIM department . To obtain more detailed information about this subject, or to download the forms in PDF format, please visit the Canada Revenue Agency website at:
http://www.cra-arc.gc.ca/formspubs/forms/td1-e.html

Note: The Federal form can be accessed by clicking on the link, TD1, Personal Tax Credit Returns form. The Federal form is located at the top of the page. To obtain the Provincial form for Ontario, please scroll down the page to the Ontario section

 

 

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