Payroll Deductions - There Are Other Credits Available
Many employees have deductions or credits available to them that are not reflected on the TD1 form.
Where an employee has such deductions or credits available, it is to his or her advantage to have the employer take these into account when calculating the tax to be withheld. Reducing tax withheld at source enhances the employee's cash flow ñ amounts that would otherwise be received as a lump-sum refund when the tax return is filed are converted into an increase in the take-home paycheque received every pay period. This is one of the reasons that in 2008 the average tax refund was $1,400 per taxpayer.
Non-Statutory Deductions
Some deductions can be taken into account by the employer without having to obtain the consent of CRA. Others require a pre-authorization from CRA before the employer can take them into account and reduce withholdings.
Deductions that do not require Approval
- the employee's contributions to a registered pension plan,
- the deduction available to an employee who resides in a prescribed Northern zone,
- union dues,
- contributions to a Retirement Compensation Arrangement or certain other pension arrangements, and
- certain contributions to a Registered Retirement Savings Plan.
Deductions that Require Approval
An employee may have deductions or credits available other than those described above which will reduce the amount of tax he or she ultimately has to pay when the tax return is filed. The employee has the right to request that the employer take these into account in calculating the amount of income tax to withhold from net pay. However, the employee must first obtain the written permission of the Canada Revenue Agency.
Permission is requested by filling a Form T1213 with the CRA on which the employee identifies the employer and the dollar amounts of deductions or credits that will be available to reduce the amount of tax. If the CRA is in agreement, an authorization will be issued to the employer.
Education resource: Excerpted from
Advanced Payroll for Professional Bookkeepers, one of the courses that comprise the
DFA, Bookkeeping Services Specialist designation program.
Help & Contact: 1 866 953 4769