Docstoc

Federal Income Tax Deductions Ontario

Document Sample
Federal Income Tax Deductions Ontario Powered By Docstoc
					                          Payroll Deductions Tables
                              CPP, EI, and income tax
                                    deductions


                                           Ontario
                                        Effective
                                     January 1, 2010
L / T4032-ON                Volume 1 of 3            www.cra.gc.ca

       Canada Revenue   Agence du revenu
       Agency           du Canada
NOTE: In this publication, the text inserted between square brackets
represents the regular print information.


            What's new as of January 1, 2010

 The major changes made to this publication since the last edition
 are outlined with a dotted line.

 This publication reflects some income tax changes recently
 announced which, if enacted by the applicable legislature as
 proposed, would be effective January 1, 2010. At press time, some
 of these proposals had not yet become law. We recommend that
 you use the new payroll deductions tables in this publication for
 withholding commencing with the first payroll in January 2010.

 There is no change to the federal income tax rates for 2010.

 The federal income tax thresholds have been indexed and the
 federal Canada Employment Credit has been indexed to $1,051
 for 2010.


                                – A-1 –
T h e f e d e r a l b a s i c p e r so n a l a m o u n t , t h e s p o u s e o r c o m m o n - l a w
partner amount and the amount for eligible dependant have been
indexed to $10,382 for the 2010 tax year.

Effective January 1, 2010, the Ontario's lowest tax rate has been
reduced from 6.05% to 5.05%.

The provincial thresholds applicable to the 20% and 36% surtax
rates of the Ontario basic tax have been reduced from $4,257 to
$3,978 and $5,373 to $5,091 respectively and have been indexed
effective January 1, 2010.

The provincial income thresholds, personal amounts and tax
reduction amounts have been indexed for 2010.

The Ontario provincial labour-sponsored funds tax rate credit has
been decreased from 15% to 10% for 2010.




                                                – A-2 –
Payroll Deductions Online Calculator
For your 2010 payroll deductions, you can use our Payroll Deductions
Online Calculator free of charge at www.cra.gc.ca/pdoc.

By using the calculator, you will help us reduce the printing and
mailing costs, and thus save public funds.

Tables on Diskette (TOD)

 Clients no longer automatically receive the CD version of the
 TABLES ON DISKETTE by mail. The January 1, 2010, edition of the
 TABLES ON DISKETTE will be published in limited quantities.

 In keeping with our goal to be environmentally conscious and
 reduce paper waste, we are significantly reducing the volume of
 hard-copy payroll products we produce each year.




                                 – A-3 –
Payroll Deductions Tables (T4032)
We encourage businesses to use electronic T4032 publications or
the Payroll Deductions Online Calculator (PDOC).

Tables on the Web
You can download the tables from our Web site at
www.cra.gc.ca/payroll and save them on your computer. You can
choose to print only the specific pages or information you need.

Generally, the electronic version of the T4032 publication is available
on our Web site before the printed version is available.

We can still mail a paper version of the tables to you on request.
Simply order one from our Web site at www.cra.gc.ca/orderforms or
call toll free at 1-800-959-2221.




                                 – A-4 –
Let us notify you
The CRA provides an electronic service that lets us notify you
immediately, free of charge, of any changes to the payroll
deductions.

To subscribe, simply visit the CRA Web site at www.cra.gc.ca/lists
and provide your business's email address for each mailing list that
interests you.

You have to deduct both federal and provincial income tax
If you are using the income tax tables in this publication to determine
your employees' and pensioners' total tax deductions, you have to
look up the amounts in the federal tax table and the provincial tax
table.

If not enough taxes have been deducted, employees and pensioners
can ask to have more tax withheld at source to adjust any tax
shortfall. To do so, employees and pensioners should complete a
federal Form TD1 and return it to you.



                                 – A-5 –
New employees and pensioners or employees and pensioners who
wish to change their federal or provincial claim amounts will have to
complete a federal Form TD1 and a provincial Form TD1 for 2010.

 Example
 You are an employer in Ontario. Sara, your employee, earns $605 a
 week in 2010 with a federal claim code 1 and a provincial claim
 code 1.
 In the federal tax deductions table, the federal tax deduction for
 $605 weekly under claim code 1 is $52.05 (see Figure 1 on
 page A-7 [3] ).
 In the Ontario tax deductions table, the provincial tax deduction for
 $605 weekly under claim code 1 is $25.80 (see Figure 2 on
 page A-8 [3] ).
 Sara's total tax deduction is $77.85 ($52.05 + $25.80). This amount
 of taxes will be included in your remittance to us.




                                – A-6 –
                            Figure 1
                 $605 weekly under claim code 1
Federal tax deductions
Effective January 1, 2010. Weekly (52 pay periods a year)
Also look up the tax deductions in the provincial table

                                 Federal claim codes
        Pay
                        0         1         2         3       4

 From   Less than               Deduct from each pay
  600    –    608     82.00    52.05      49.20     43.50   37.75
  608    –    616     83.15    53.20      50.35     44.60   38.90
  616    –    624     84.25    54.30      51.45     45.70   40.00
  624    –    632     85.40    55.45      52.55     46.85   41.10
  632    –    640     86.50    56.55      53.70     47.95   42.25




                               – A-7 –
                            Figure 2
                 $605 weekly under claim code 1
Ontario provincial tax deductions
Effective January 1, 2010. Weekly (52 pay periods a year)
Also look up the tax deductions in the federal table

                               Provincial claim codes
       Pay
                       0          1         2          3     4

From    Less than               Deduct from each pay
 594    –    602     34.10     25.45     24.50     22.65   20.75
 602    –    610     34.50     25.80     24.90     23.00   21.15
 610    –    618     34.85     26.20     25.25     23.40   21.50
 618    –    626     35.25     26.55     25.65     23.75   21.90
 626    –    634     35.65     26.95     26.00     24.15   22.25




                               – A-8 –
                             Table of contents
                                                                                   Page


                                           A
Who should use this publication? ......................................... A-17 [6]
   What if your pay period is not in this publication? ............... A-18 [6]
   Which provincial or territorial tax table should you use? ...... A-18 [6]

Federal tax for 2010 ........................................................... A-20 [7]
   Indexing for 2010 ............................................................ A-20 [7]
   Tax rates and income thresholds ...................................... A-20 [7]
   Canada Employment Credit ............................................. A-21 [7]
   Personal amounts ........................................................... A-22 [8]
   Labour-sponsored funds .................................................. A-22 [8]




                                         – A-9 –
                                                                                      Page

Provincial tax for 2010 ........................................................ A-23 [8]
   Provincial tax on income .................................................. A-23 [8]
   Tax deductions tables ..................................................... A-23 [8]
   Provincial indexing for 2010 ............................................. A-24 [8]
   Tax rates and income thresholds ...................................... A-24 [9]
   Ontario Health Premium ................................................... A-25 [9]
   Surtax ........................................................................... A-26 [9]
   Tax reduction ................................................................ A-27 [10]
   Personal amounts .......................................................... A-28 [10]
   Labour-sponsored funds ................................................. A-28 [10]

Canada Pension Plan (CPP) and Employment
Insurance (EI) ................................................................... A-29 [11]
   CPP contributions for 2010 ............................................. A-29 [11]


                                          – A-10 –
                                                                                     Page
   EI premiums for 2010 ..................................................... A-30 [11]

Personal tax credits returns (TD1 forms) .............................. A-32 [12]
   Federal Form TD1, 2010 Personal Tax Credits Return ........ A-33 [12]
   Provincial Form TD1ON, 2010 Ontario Personal Tax
   Credits Return ............................................................... A-33 [12]

Claim codes ...................................................................... A-35 [13]
   Explanation of claim codes ............................................. A-35 [13]
      Claim code 0 .............................................................. A-35 [13]
      Claim codes 1 to 10 .................................................... A-35 [13]
      Indexing of claim codes amounts .................................. A-36 [13]
      Chart 1 – 2010 federal claim codes .............................. A-36 [14]
      Chart 2 – 2010 Ontario claim codes .............................. A-38 [14]
   Employment income from all sources................................ A-39 [14]


                                         – A-11 –
                                                                                  Page

Tax deductions from commission income .............................. A-40 [15]
   Form TD1X, Statement of Commission Income
   and Expenses for Payroll Tax Deductions ......................... A-40 [15]

Payroll Deductions Online Calculator ................................... A-41 [15]

Tables on Diskette............................................................. A-42 [16]

How to use the tables in this publication .............................. A-42 [16]
   CPP tables (Section B) ................................................... A-43 [16]
   EI table (Section C)........................................................ A-43 [16]
   Tax deductions tables .................................................... A-44 [16]
      Federal (Section D) .................................................... A-44 [17]
      Provincial (Section E) ................................................. A-45 [17]




                                        – A-12 –
                                                                                Page

Some information about payroll deductions .......................... A-45 [17]
  Deducting tax from income not subject to
  CPP contributions or EI premiums.................................... A-46 [17]
  Deducting tax when the employee has a
  labour-sponsored funds tax credit .................................... A-46 [18]
  Payroll remittances (Form PD7A, Statement of
  Account for Current Source Deductions) ........................... A-47 [18]
  Pay statements and T4 slips, Statement of
  Remuneration Paid ......................................................... A-47 [18]
  Employee reports for work at an establishment of the
  employer in Canada ....................................................... A-48 [18]
  Employee works in Canada, but does not report for
  work at an establishment of the employer ......................... A-49 [19]
  Employee works in Canada, but employer does not
  have an establishment in Canada .................................... A-51 [19]


                                      – A-13 –
                                                                                     Page

Step-by-step calculation of tax deductions ........................... A-52 [20]
   Example 1 – Tax to deduct for all income except
   commissions.................................................................. A-53 [20]
   Example 2 – Tax to deduct for commission income ............ A-63 [23]
      Chart 3 – 2010 federal tax rates and income
      thresholds ................................................................. A-73 [25]
      Chart 4 – 2010 Ontario tax rates and income
      thresholds ................................................................. A-74 [26]
      Chart 5 – Ontario tax reduction for 2010 ....................... A-74 [26]

Your opinion counts! .......................................................... A-75 [26]




                                         – A-14 –
                                                                               Page

                                         B
Canada Pension Plan Contributions Tables
The CPP tables are not part of this file. However, they are available in
the January 1, 2010 paper version of this publication and on our Web
site.

                                         C
Employment Insurance Premiums Table .................................. C-1 [1]

The EI tables are not part of this file. However, they are available in
the January 1, 2010 paper version of this publication and on our Web
site.


                                         D
Federal Tax Deductions Tables .............................................. D-1 [1]
  Weekly (52 pay periods) .................................................... D-1 [1]

                                      – A-15 –
                                                                               Page
  Biweekly (26 pay periods) .................................................. D-7 [7]
  Semi-monthly (24 pay periods) ........................................D-13 [13]
  Monthly (12 pay periods) ................................................D-19 [19]


                                         E
Provincial Tax Deductions Tables ........................................... E-1 [1]
  Weekly (52 pay periods) .................................................... E-1 [1]
  Biweekly (26 pay periods) .................................................. E-7 [7]
  Semi-monthly (24 pay periods) ........................................ E-13 [13]
  Monthly (12 pay periods) ................................................ E-19 [19]

This publication uses plain language to explain the most common tax
situations. If you need more help, contact your tax services office.




                                      – A-16 –
            Who should use this publication?
You use this publication if you are an employer or a payer. This
publication contains tables for federal and provincial tax deductions,
CPP contributions and EI premiums. It will help you determine the
payroll deductions for your employees or pensioners.

For more information on deducting, remitting, and reporting payroll
deductions, see the following employers' guides:
• T4001, Employers' Guide – Payroll Deductions and Remittances
• T4130, Employers' Guide – Taxable Benefits and Allowances
• RC4110, Employee or Self-employed?
• RC4120, Employers' Guide – Filing the T4 Slip and Summary
• RC4157, Deducting Income Tax on Pension and Other Income, and
  Filing the T4A Slip and Summary

These guides are available on our Web site at www.cra.gc.ca. You
can also complete the order form available on our Web site, or call
1-800-959-2221.

                                – A-17 –
 Note
 You may want to keep the 2009 edition of the tables publications
 until the end of 2010. They may help you resolve any Pensionable
 and Insurable Earnings Review (PIER) deficiencies that we identify
 in processing your 2009 T4 return.

What if your pay period is not in this publication?
This publication contains the most common pay periods: weekly,
biweekly (every two weeks), semi-monthly, and monthly. If you have
unusual pay periods, such as hourly, daily (240 working days), or 10,
13, or 22 pay periods a year, see the PAYROLL DEDUCTIONS
SUPPLEMENTARY TABLES (T4008) or TABLES ON DISKETTE (TOD) to
determine the tax deductions.

Which provincial or territorial tax table should you use?

 See the section called "Some information about payroll deductions"
 on page A-45 [17].



                               – A-18 –
Before you decide which tax table to use, you have to determine your
employee's province or territory of employment. This depends on
whether or not you require the employee to report for work at your
place of business.

If the employee reports for work at your place of business, the
province or territory of employment is considered to be the province
or territory where your business is located.

To withhold payroll deductions, use the tax table for that province or
territory of employment.

If you do not require the employee to report for work at your place of
business, the province or territory of employment is the province or
territory in which your business is located, and from which you pay
your employee's salary.




                                – A-19 –
                     Federal tax for 2010
Indexing for 2010

 For 2010, the federal income thresholds, the personal amounts and
 the Canada Employment Credit have been increased based on
 changes in the Consumer Price Index and other increases
 mentioned on page A-1.

 The federal indexing factor for January 1, 2010 is 0.6%. The tax
 credits corresponding to the claim codes in the tables have been
 indexed accordingly. Employees will automatically receive the
 indexing increase, whether or not they file a Form TD1,
 2010 PERSONAL TAX CREDITS RETURN.


Tax rates and income thresholds

 For 2010, the tax rates and income thresholds are as follows:
 • 15% of taxable income less than or equal to $40,970;


                               – A-20 –
• 22% of taxable income greater than $40,970 and less than or
  equal to $81,941;
• 26% of taxable income greater than $81,941 and less than or
  equal to $127,021; and
• 29% of taxable income greater than $127,021.


Canada Employment Credit

The non-refundable tax credit, Canada Employment amount is built
into the federal payroll deductions tables. The federal Canada
Employment Credit is the lesser of:
• $1,051; and
• the individual's employment income for the year.

The maximum annual credit is $157.65.




                              – A-21 –
 Please note that pension income in not eligible for this credit. If you
 are paying pension income use TABLES ON DISKETTE to find the tax
 deduction.


Personal amounts

 Most of the federal personal amounts for 2010 are revised. For
 more detailed information on the personal amounts, see Form TD1.
 Basic personal amount                                        $ 10,382
 Spouse or common-law partner amount                          $ 10,382
 Amount for an eligible dependant                             $ 10,382



Labour-sponsored funds
The federal labour-sponsored funds tax credit is the lesser of:
• $750; or


                                 – A-22 –
• 15% of the purchase of approved shares.

The credit is not built into the federal payroll deductions tables but it
is included in examples 1 and 2. For more information, see the section
called "Step-by-step calculation of tax deductions" on page A-52 [20].


                    Provincial tax for 2010
Provincial tax on income
Ontario uses the Tax on Income (TONI) method to determine
individual provincial income tax. The provincial income tax rate is
applied to the taxable income amount.

Tax deductions tables
You will have to look up tax deductions in a provincial as well as a
federal tax deductions table.




                                 – A-23 –
Provincial indexing for 2010

 For 2010, the income thresholds, personal amounts, and tax
 reduction amounts are indexed. They have been increased based
 on changes in the Consumer Price Index.

 The indexing factor for January 1, 2010, is 0.7%. The tax credits
 corresponding to the claim codes in the tables have been indexed
 accordingly. Employees will automatically receive the indexing
 increase, whether or not they file a Form TD1ON, 2010 ONTARIO
 PERSONAL TAX CREDITS RETURN.


Tax rates and income thresholds

 Ontario's tax rates and income thresholds for 2010 are revised as
 follows:
 • 5.05% on taxable income less than or equal to $37,106;
 • 9.15% on taxable income greater than $37,106 and less than or
   equal to $74,214; and

                               – A-24 –
 • 11.16% on taxable income greater than $74,214.


Ontario Health Premium
Effective January 1, 2010, the Ontario Health Premium is as follows:
• when taxable income is less than or equal to $20,000, the premium
  is $0;
• when taxable income is greater than $20,000 and less than or equal
  to $36,000, the premium is equal to the lesser of (i) $300, and
  (ii) 6% of taxable income greater than $20,000;
• when taxable income is greater than $36,000 and less than or equal
  to $48,000, the premium is equal to the lesser of (i) $450, and
  (ii) $300 plus 6% of taxable income greater than $36,000;
• when taxable income is greater than $48,000 and less than or equal
  to $72,000, the premium is equal to the lesser of (i) $600, and
  (ii) $450 plus 25% of taxable income greater than $48,000;




                               – A-25 –
• when taxable income is greater than $72,000 and less than or equal
  to $200,000, the premium is equal to the lesser of (i) $750, and
  (ii) $600 plus 25% of taxable income greater than $72,000; and
• when taxable income is greater than $200,000, the premium is
  equal to the lesser of (i) $900, and (ii) $750 plus 25% of taxable
  income greater than $200,000.

Surtax

 Ontario's surtax for 2010 is revised as follows:
 • where the basic provincial tax payable is less than or equal to
   $4,006, the surtax is $0;
 • where the basic provincial tax payable is greater than $4,006 and
   less than or equal to $5,127, the surtax is 20% of the basic
   provincial tax payable over $4,006; and
 • where the basic provincial tax payable is greater than $5,127, the
   surtax is 20% of the basic provincial tax payable over $4,006,
   plus 36% of the basic provincial tax payable over $5,127.


                                – A-26 –
Tax reduction

 Ontario's tax reduction amounts for 2010 are revised as follows:
 Basic personal amount                                        $ 206
 Amount for each dependant under age 18                       $ 382
 Amount for each dependant with a disability that the
 employee or pensioner has claimed on Form TD1ON              $ 382

 The reduction remains equal to twice the individual's personal
 amounts minus the provincial tax payable before reduction. The
 reduction cannot be more than the provincial tax payable before
 reduction. The reduction is nil when the provincial tax payable
 before reduction exceeds twice the personal amounts.

 Because of the way the reduction for dependants with disabilities is
 determined, we include only the basic amount in the provincial tax
 tables.




                               – A-27 –
Personal amounts

Listed below are some of the revised provincial non-refundable
personal tax credits. For more detailed information on the personal
amounts, see Form TD1ON.
Basic personal amount                                      $ 8,943
Spouse or common-law partner amount                        $ 7,594
Amount for an eligible dependant                           $ 7,594


Labour-sponsored funds

The revised provincial labour-sponsored funds tax credit for Ontario
is the lesser of:
• $750; or
• 10% of the purchase of approved shares.



                              – A-28 –
 The credit is not built into the provincial payroll deductions tables
 but it is included in examples 1 and 2. For more information, see
 the section called "Step-by-step calculation of tax deductions" on
 page A-52 [20].


              Canada Pension Plan (CPP) and
                Employment Insurance (EI)

CPP contributions for 2010
 Maximum pensionable earnings                               $    47,200
 Annual basic exemption                                     $     3,500
 Maximum contributory earnings                              $    43,700
 Contribution rate (4.95%)                                       0.0495
 Maximum employee contribution                              $ 2,163.15
 Maximum employer contribution                              $ 2,163.15


                                 – A-29 –
You stop deducting CPP when the employee reaches the maximum
contribution for the year.

Employer's contribution
You have to make a contribution equal to the contributions deducted
from the employee's remuneration. You have to make contributions
regardless of what amount any other employer may have deducted.

EI premiums for 2010
 Maximum annual insurable earnings                         $ 43,200
 Premium rate (1.73%)                                        0.0173
 Maximum annual employee premium                           $ 747.36

 Note
 When you use the table in this publication to determine the
 EI premiums, look up the insurable earnings for the period, not the
 gross remuneration.


                               – A-30 –
Employer premiums
You withhold EI premiums beginning with the first dollar of insurable
earnings. You stop deducting premiums when you reach the
employee's maximum annual insurable earnings.

You have to deduct EI premiums based on your employee's insurable
earnings. You do not consider any other insurable earnings your
employee may have had during the year with other employers. If an
employee leaves your employment during the year, you are not
entitled to a refund of premiums.

Your premium is 1.4 times the employee's premium for the pay period.
However, if you have a wage-loss replacement plan, you can ask for a
reduction in your contribution rate.

If you need more information about the employer's reduced
EI premiums, contact:




                                – A-31 –
 Service Canada
 Premium Reduction Program
 120 Harbourview Boulevard
 P.O. Box 11000
 Bathurst NB E2A 4T5
 Telephone: 1-800-561-7923
 Fax:       506-548-7473


        Personal tax credits returns (TD1 forms)
You may have to ask your employees or your pensioners to complete
a federal and a provincial personal tax credits return using a federal
Form TD1 and a provincial Form TD1.

The claim code amounts do not appear on either the federal or the
provincial TD1 form. See the section called "Claim codes" on
page A-35 [13].




                                – A-32 –
Federal Form TD1, 2010 Personal Tax Credits Return

 We have revised the federal Form TD1 effective January 1, 2010.
 We do not require every employee or pensioner to file a Form TD1
 for 2010. However, new employees and pensioners, or employees
 and pensioners who wish to change their federal claim amounts will
 have to complete the federal Form TD1 for 2010.

Form TD1-WS, WORKSHEET FOR THE 2010 PERSONAL TAX CREDITS
RETURN, is available for employees or pensioners who choose to
calculate reduced claims for some of the federal personal tax credits.

Provincial Form TD1ON, 2010 Ontario Personal Tax Credits
Return

 We have revised the provincial Form TD1ON effective January 1,
 2010. We do not require every employee or pensioner to file a
 Form TD1ON for 2010. However, new employees and pensioners, or
 employees and pensioners who wish to change their provincial


                                – A-33 –
 claim amounts will have to complete the provincial Form TD1ON for
 2010.

Form TD1ON-WS, WORKSHEET FOR THE 2010ONTARIO PERSONAL TAX
CREDITS RETURN, is available for employees or pensioners who choose
to calculate reduced claims for some of the provincial personal tax
credits.

Employees must complete the Form TD1 that corresponds to their
province of employment. Pensioners must complete the Form TD1 that
corresponds to their province of residence.

An employee who lives in one province or territory but works in
another may be subject to excessive tax deductions. If so, the
employee can ask for a reduction in tax deductions by asking for a
letter of authority from any tax services office. For more information,
see Chapter 6 of the employers' guide called PAYROLL DEDUCTIONS
AND REMITTANCES.




                                – A-34 –
                          Claim codes
The total personal amount an employee claims will determine which
claim code you will use. For 2010, the claim amounts that correspond
to the federal claim codes are not the same as the claim amounts that
correspond to the provincial claim codes. See Chart 1 and Chart 2 on
pages A-36 and A-38 [14].

The claim codes and corresponding amounts do not appear on either
the federal or the provincial TD1 form.

Explanation of claim codes
Claim code 0
This code represents no claim amount allowed. If the federal claim
code is "0" because the employee is a non-resident, the provincial
claim code must also be "0."

Claim codes 1 to 10
You match the "Total claim amount" reported on your employee's or
pensioner's TD1 forms with the appropriate claim codes. Then, you

                               – A-35 –
look up the tax for the employee's pay under the claim code in the
federal and provincial tax tables for the pay period.

Indexing of claim codes amounts

 The credits applicable to each federal and provincial claim code
 have been automatically increased in the tax tables by the indexing
 factor for the current year. If your employee did not complete the
 federal and provincial TD1 forms for 2010, you continue to deduct
 income tax using the same claim code that you used last year.


                                 Chart 1
                         2010 federal claim codes
         Total claim amount ($)                     Claim code
            No claim amount                             0
       Minimum       –        10,382.00                 1
     10,382.01       –        12,366.00                 2


                                 – A-36 –
   Total claim amount ($)                 Claim code
12,366.01     –         14,350.00              3
14,350.01     –         16,334.00              4
16,334.01     –         18,318.00              5
18,318.01     –         20,302.00              6
20,302.01     –         22,286.00              7
22,286.01     –         24,270.00              8
24,270.01     –         26,254.00              9
26,254.01     –         28,238.00             10
28,238.01     –          and over              X
   The employer must do a manual calculation of tax.
       No withholding                          E




                          – A-37 –
                     Chart 2
             2010 Ontario claim codes
  Total claim amount ($)                Claim code
     No claim amount                        0
 Minimum     –         8,943.00             1
 8,943.01    –      10,870.00               2
10,870.01    –      12,797.00               3
12,797.01    –      14,724.00               4
14,724.01    –      16,651.00               5
16,651.01    –      18,578.00               6
18,578.01    –      20,505.00               7
20,505.01    –      22,432.00               8
22,432.01    –      24,359.00               9
24,359.01    –      26,286.00               10

                        – A-38 –
         Total claim amount ($)                   Claim code
      26,286.01      –        and over                 X
          The employer must do a manual calculation of tax.
             No withholding                            E


Employment income from all sources
On the federal and provincial TD1 forms, under the heading "Income
from other employers or payers," employees can indicate that their
expected employment income from all sources will be less than their
total claim amount. If an employee states that his or her total
expected income will be less than the "Total claim amount" on the
TD1 forms, do not deduct any federal or provincial tax.

However, as an employer, if you know that this statement is false, you
must deduct federal and provincial tax from the salary. Deduct tax
according to the claim code that applies to the "Total claim amount"
on the TD1 forms.



                                 – A-39 –
It is a serious offence to knowingly accept a Form TD1 that contains
false or deceptive statements. If you are not sure a statement is true,
contact your tax services office for advice.


       Tax deductions from commission income
For information about tax deductions for commission income, see the
section called "Example 2, Tax to deduct for commission income" on
page A-63 [23]. You can also use the Payroll Deductions Online
Calculator to find the payroll deductions for commission income.

Form TD1X, Statement of Commission Income and Expenses
for Payroll Tax Deductions
We have not revised Form TD1X, STATEMENT OF COMMISSION INCOME
AND EXPENSES FOR PAYROLL TAX DEDUCTIONS, for 2010.

Your employees must complete a Form TD1X, if they want you to
adjust their tax deductions to take into account their commission
expenses.



                                – A-40 –
You deduct tax from your employees commission pay using the "Total
claim amount" on their TD1 Forms, in one of the following cases:
• if your employees do not complete a Form TD1X; or
• if they inform you in writing that they want to cancel a previously
  completed Form TD1X.


          Payroll Deductions Online Calculator
For your 2010 payroll deductions, you can use our Payroll Deductions
Online Calculator free of charge.

The Payroll Deductions Online Calculator is an interactive web
application that calculates payroll deductions for all pay periods,
provinces (except for Quebec), and territories. You will find a link to
the Payroll Deductions Online Calculator at www.cra.gc.ca/pdoc.

The Payroll Deductions Online Calculator applies the exact taxable
income amount to determine the tax deductions. The calculations are
more precise than those produced by the TABLES ON DISKETTE (TOD)
and tax tables.


                                 – A-41 –
The Payroll Deductions Online Calculator offers you the most recent
calculations as well as previous versions back to January 1, 2007.


                       Tables on Diskette
TABLES ON DISKETTE (TOD) is a stand-alone computer program that
calculates payroll deductions for all pay periods, provinces (except for
Quebec), and territories.

 The January 1, 2010, edition of the TABLES ON DISKETTE will be
 published in limited quantities.

 TOD includes the revised federal and provincial payroll deductions
 effective January 1, 2010.


        How to use the tables in this publication
Use the tables in this publication to determine the CPP contributions,
EI premiums, federal tax, and provincial tax you will deduct from your
employees' remuneration.

                                – A-42 –
CPP tables (Section B)
The annual basic exemption is built into the CPP tables.
• Find the pages in Section B that correspond to your pay period.
• Look down the "Pay" column to find the range that includes your
  employee's gross pay (this includes any taxable benefits).
• In the shaded column next to the "Pay" column, you will find the
  CPP contribution that you should withhold from your employee's
  pay.

EI table (Section C)
• Find the page in Section C that corresponds to the "Insurable
  earnings" of your employee.
• Look down the "Insurable earnings" column to find the range that
  includes your employee's insurable earnings.
• In the shaded column next to the "Insurable earnings" column, you
  will find the EI premium that you should withhold from your
  employee's pay.

                                – A-43 –
Tax deductions tables
You must add the federal and provincial tax amounts to determine the
total tax you deduct for the pay period.

Even if the period of employment for which you pay a salary is less
than a full pay period, you must continue to use the tax deductions
table that corresponds to your regular pay period.

Federal (Section D)
• Find the pages in Section D that correspond to your pay period.
• Look down the "Pay" column to find the range that corresponds to
  your employee's taxable income (this includes any taxable
  benefits).
• In that row under the applicable claim code, you will find the
  amount of federal tax that you should withhold from your
  employee's pay (see the section called "Claim codes" on
  page A-35 [13] and Chart 1 on page A-36 [14] for more
  information).



                                – A-44 –
Provincial (Section E)
• Find the pages in Section E that correspond to your pay period.
• Look down the "Pay" column to find the range that includes your
  employee's taxable income (this includes any taxable benefits).
• In that row under the applicable claim code, you will find the
  amount of provincial tax that you should withhold from your
  employee's pay (see the section called "Claim codes" and Chart 2
  on pages A-35 and A-38 [14] for more information).


      Some information about payroll deductions
Use the information in this publication with our employers' guides.
These guides will give you all the information you need for deducting,
remitting, and reporting amounts.




                                – A-45 –
Deducting tax from income not subject to CPP contributions
or EI premiums
To determine the amount of tax to deduct from income not subject to
CPP contributions or EI premiums, you can use the Payroll Deductions
Online Calculator or the TABLES ON DISKETTE.

Deducting tax when the employee has a labour-sponsored
funds tax credit
You may reduce tax deductions for an employee who has a tax credit
from the purchase of qualifying shares of a labour-sponsored venture
capital corporation. If the amounts for the share purchase are payroll
deducted, you can make the reduction in tax without a letter of
authority from a tax services office.

To allow the credit, first determine the annual federal and provincial
tax credit arising from the share purchase. Next, divide the credit by
the number of pay periods in the year. Finally, reduce the tax shown
in the federal or provincial table by the tax credit for the pay period.



                                 – A-46 –
If the share purchase or the tax credit deductions begin after the first
pay period in the year, the credit can be "accelerated." This is done
by multiplying the credit by the total number of pay periods in the year
and then dividing by the number of pay periods remaining in the year.
The resulting amount is used to reduce tax in each remaining pay
period.

Payroll remittances (Form PD7A, Statement of Account for
Current Source Deductions)
You will report the combined federal and provincial tax deductions on
payroll remittance forms. Also, make periodic remittances to the
Canada Revenue Agency (CRA) of federal and provincial tax, Canada
Pension Plan (CPP) contributions, and Employment Insurance (EI)
premiums.

Pay statements and T4 slips, Statement of Remuneration
Paid
You will show the combined federal and provincial tax deductions on
your pay statements. Also, you will file only one T4 slip per employee


                                – A-47 –
no later than the last day of February of each year. The T4 slip will
show combined federal and provincial tax deductions.

Employee reports for work at an establishment of the
employer in Canada
Resident of Canada
Use the Payroll Deductions Tables for the province or territory where
the employee reports to work.

Deemed resident or sojourner
Use the Payroll Deductions Tables for In Canada Beyond the Limits of
Any Province or Outside Canada.

Part-year resident, for the part of the year he/she is resident in
Canada
Use the Payroll Deductions Tables for the province or territory where
the employee reports for work.



                                – A-48 –
Part-year resident, for the part of the year he/she is non-resident
Use the Payroll Deductions Tables for the province or territory where
employment duties are performed.

Non-resident, including a commuter
Use the Payroll Deductions Tables for the province or territory where
employment duties are performed.

Employee works in Canada, but does not report for work at
an establishment of the employer
Resident of Canada
Use the Payroll Deductions Tables for the province or territory where
the employer's establishment is located and from which the
employee's salary is paid.

Deemed resident or sojourner
Use the Payroll Deductions Tables for In Canada Beyond the Limits of
Any Province or Outside Canada.

                               – A-49 –
Part-year resident, for the part of the year he/she is resident in
Canada
Use the Payroll Deductions Tables for the province or territory where
the employer's establishment is located and from which the
employee's salary is paid.

Part-year resident, for the part of the year he/she is non-resident
Use the Payroll Deductions Tables for the province or territory where
employment duties are performed.

Non-resident, including a commuter
Use the Payroll Deductions Tables for the province or territory where
employment duties are performed.




                               – A-50 –
Employee works in Canada, but employer does not have an
establishment in Canada
Resident of Canada
Use the Payroll Deductions Tables for In Canada Beyond the Limits of
Any Province or Outside Canada.

Deemed resident or sojourner
Use the Payroll Deductions Tables for In Canada Beyond the Limits of
Any Province or Outside Canada.

Part-year resident, for the part of the year he/she is resident in
Canada
Use the Payroll Deductions Tables for In Canada Beyond the Limits of
Any Province or Outside Canada.

Part-year resident, for the part of the year he/she is non-resident
Use the Payroll Deductions Tables for the province or territory where
employment duties are performed.


                               – A-51 –
Non-resident, including a commuter
Use the Payroll Deductions Tables for the province or territory where
employment duties are performed.

   Note
   For more information, see T4001, EMPLOYERS' GUIDE – PAYROLL
   DEDUCTIONS AND REMITTANCES.


           Step-by-step calculation of tax deductions
Y o u c a n u s e t h e f o l l o w i ng s t e p - b y - s t e p c a l c u l a t i o n s t o c a l c u l a t e t h e
tax deductions for any employee or pensioner who earns more than
the maximum amounts included in the tax deductions tables. You can
also use the calculations for commission income or any employee with
claim code "0" who earns less than the minimum amount shown in the
tables. These calculations will also help you to determine a detailed
and more exact amount of tax to deduct from the remuneration of your
employees or pensioners.

Example 1 shows you how to determine the amount of tax to deduct
from all income except commissions.

                                                    – A-52 –
Example 2 shows you how to determine the amount of tax to deduct
from commission income.

You can follow the steps in either of Example 1 or Example 2 to
calculate the amount of tax to deduct for a pay period. Follow the
order shown, otherwise, your results will not be correct.

However, if you design your own payroll program or spreadsheets to
calculate tax deductions, do not use either of these calculations.
Instead, see the publication called PAYROLL DEDUCTIONS FORMULAS
FOR COMPUTER PROGRAMS (T4127).


Example 1
Tax to deduct for all income except commissions
This example applies to a person who earns $1,500 weekly,
contributes $60 to a registered pension plan (RPP), $8 for union dues,
and $80 to a registered retirement savings plan (RRSP).

This person claims the basic personal amount plus the full claim
amount for a dependent spouse.


                                – A-53 –
This person bought $850 of approved shares of the capital stock of
prescribed labour-sponsored venture capital corporations.

Calculate annual taxable income
(1)   Gross remuneration for the pay period (weekly)          $   1,500.00
(2)   Minus
      • the RPP or retirement compensation
          arrangement (RCA) contributions       $ 60.00
      • the union dues                                 8.00
      • the other amounts authorized by a
          tax services office                          0.00
      • the RRSP contributions*                    80.00
                                                              –    148.00

      *   This amount has to be deducted at source.
(3)   Net remuneration for the pay period                     $   1,352.00


                                  – A-54 –
(4)   Annual net income
      ($1,352 × 52 weeks)                                $ 70,304.00
(5)   Minus the annual deduction for living in a
      prescribed zone, reported on Form TD1              –       N/A
(6)   Annual taxable income                              $ 70,304.00

Calculate federal tax
(7)   Multiply the amount at line 6 by the federal tax
      rate based on Chart 3 on page A-73 [25].           ×       0.22
                                                         $ 15,466.88
(8)   Minus the federal constant based on the annual
      taxable income at line 6 (see Chart 3)             –   2,868.00
(9)   Federal tax (line 7 minus line 8)                  $ 12,598.88




                                 – A-55 –
(10) Minus the federal tax credits:
     • the total of personal tax credit
       amounts reported on the federal
       Form TD1                             $ 20,764.00
     • the CPP contributions for the pay
       period multiplied by the number of
       pay periods in the year
       (annual maximum $2,163.15)*            2,163.15
     • the EI premiums for the pay period
       multiplied by the number of pay
       periods in the year
       (annual maximum $747.36)*                747.36
     • the Canada Employment Credit
       (annual maximum $1,051.00)             1,051.00
     Total                                  $ 24,725.51




                                – A-56 –
     *Note
     When the maximum CPP contributions
     or EI premiums for the year is
     reached, use the maximum amount for
     subsequent calculations
(11) Multiply the total at line 10 by the
     lowest federal tax rate for the year.      ×   0.15
(12) Total federal tax credits                             –   3,708.83
(13) Basic federal tax (line 9 minus line 12)              $   8,890.05
(14) Minus the federal labour-sponsored funds tax
     credit
     The lesser of:
     (i) $750 or
     (ii) 15% of the purchase of approved shares
          (15% × $850 = $127.50)




                                 – A-57 –
     Labour-sponsored funds federal tax
     credit                                                 –    127.50
(15) Total federal tax payable for the year
     (line 13 minus line 14)                                $   8,762.55

Calculate provincial tax
(16) Basic provincial tax for Ontario: multiply the
     amount at line 6 by the provincial tax rate based on
     Chart 4 on page A-74 [26].                             $   6,432.82
(17) Minus the provincial constant based on the annual
     taxable income at line 6 (See Chart 4)                 –   1,521.00
(18) Provincial tax on income for Ontario
     (line 16 minus line 17)                                $   4,911.82
(19) Minus the provincial tax credits:
     • the total of personal tax credit
       amounts reported on Form TD1ON         $ 16,537.00



                                – A-58 –
     • the CPP contributions for the pay
       period multiplied by the number of
       pay periods in the year
       (annual maximum $2,163.15)*                  2,163.15
     • the EI premiums for the pay period
       multiplied by the number of pay
       periods in the year
       (annual maximum $747.36)*                     747.36
     Total                                      $ 19,447.51

     *Note
     When the maximum CPP contributions
     or EI premiums for the year is
     reached, use the maximum amount for
     subsequent calculations
(20) Multiply the total at line 19 by the
     lowest provincial tax rate for the year.   ×    0.0505
(21) Total provincial tax credits                              –   982.10


                                    – A-59 –
(22) Basic provincial tax
     (line 18 minus line 21)                             $   3,929.72

(23) Provincial surtax
     • where line 22 is less than or equal
       to $4,006, the surtax is $0
     • where line 22 is greater than $4,006
       and less than or equal to $5,127,
       the surtax is 20% of line 22 that
       exceeds $4,006                         $   0.00
     • where line 22 is greater than
       $5,127, the surtax is 20% of line 22
       that exceeds $4,006 plus 36% of
       line 22 that exceeds $5,127                0.00
     Provincial surtax                                   +       0.00
(24) Total provincial tax including surtax               $   3,929.72




                                – A-60 –
(25) Ontario Health Premium
     Determine the premium based on the annual
     taxable income (line 6) and the explanation on
     page A-25 [9].
     The premium is the lesser of:
     (i) $600 or
     (ii) $450 plus 25% of taxable income greater than
          $48,000 and less than or equal to $72,000:          +    600.00
(26) Provincial tax payable before reduction
     (line 24 plus line 25)                                   $   4,529.72
(27) Minus the provincial tax reduction:
     The lesser of:
     (i) the total provincial tax payable at
         line 24; and                          $   3,929.72

     (ii) twice the applicable personal
          amounts shown in Chart 5 on
          page A-74 [26]                       $    412.00


                                 – A-61 –
        minus the amount at line (i)             – 3,929.72
        above. If the result is negative,
        substitute $0.                           $     0.00

                                                              –       0.00
(28) Provincial tax before labour-sponsored funds tax
     credit                                                   $   4,529.72
(29) Minus the provincial labour-sponsored funds tax
     credit
     The lesser of:

     (i) $750 or

     (ii) 10% of the purchase of approved shares
          ($850 × 10% = $85.00)                               –     85.00

(30) Total provincial tax payable for the year
     (line 26 minus line 29)                                  $   4,444.72




                                – A-62 –
Calculate total tax and the tax deduction for the pay period
(31) Total federal and provincial tax deductions for the
     year: (line 15 plus line 30)
     If the result is negative, substitute $0.             $ 13,207.27

(32) Tax deduction for the pay period:
     Divide the amount at line 31 by the number of
     pay periods in the year (52).                         $   253.99


Example 2
Tax to deduct for commission income
This example is for a person who is paid by commission. Form TD1X
shows a total remuneration of $80,400 and expenses of $10,000. This
person claims the basic personal claim amount on the federal and
provincial TD1 orms. This person bought $1,850 of approved shares of
the capital stock of prescribed labour-sponsored venture capital
corporations.




                                – A-63 –
This person has registered pension plan (RPP) contributions of $1,000
and has received authorization from a tax services office to reduce
the amount subject to income tax by an annual deduction of $4,000.

Calculate annual taxable income
(1)   Total remuneration reported on Form TD1X              $ 80,400.00
(2)   Minus
      • the total expenses reported on
        Form TD1X                            $ 10,000.00
      • RPP or retirement compensation
        arrangement (RCA) contributions          1,000.00
      • the other amounts authorized by a
        tax services office                      4,000.00
      • the RRSP contributions*                      0.00
                                                            – 15,000.00
      *Thisamount has to be deducted at
       source.

                                  – A-64 –
(3)   Annual net income                                     $ 65,400.00
(4)   Minus the annual deduction for living in a
      prescribed zone, reported on Form TD1                 –       N/A
(5)   Annual taxable income                                 $ 65,400.00

Calculate federal tax
(6)   Multiply the amount at line 5 by the federal tax
      rate based on Chart 3 on page A-73 [25].              ×       0.22
                                                            $ 14,388.00
(7)   Minus the federal constant based on the annual
      taxable income at line 5 (see Chart 3)                –   2,868.00
(8)   Federal tax (line 6 minus line 7)                     $ 11,520.00
(9)   Minus the federal tax credits:
      • the total of personal tax credit
        amounts reported on the federal
        Form TD1                              $ 10,382.00


                                 – A-65 –
     • the CPP contributions for the year
       based on line 1
       (annual maximum $2,163.15)*               2,163.15
     • the EI premiums for the year
       based on line 1
       (annual maximum $747.36)*                  747.36
     • the Canada Employment Credit
       (annual maximum $1,051.00)                1,051.00
     Total                                   $ 14,343.51

     *Note
     When the maximum CPP contributions
     or EI premiums for the year is
     reached, use the maximum amount for
     subsequent calculations
(10) Multiply the total at line 9 by the
     lowest federal tax rate for the year.   ×       0.15
(11) Total federal tax credits                              –   2,151.53

                                 – A-66 –
(12) Basic federal tax
     (line 8 minus line 11)                                 $   9,368.47
(13) Minus the federal labour-sponsored funds tax
     credit
     The lesser of:
     (i) $750 or

     (ii) 15% of the purchase of approved shares
          (15% × $1,850 = $277.50)
     Labour-sponsored funds federal tax credit              –    277.50
(14) Total federal tax payable for the year
     (line 12 minus line 13)                                $   9,090.97

Calculate provincial tax
(15) Basic provincial tax for Ontario: multiply the
     amount at line 5 by the provincial tax rate based on
     Chart 4 on page A-74 [26].                             $   5,984.10


                                – A-67 –
(16) Minus the provincial constant based on the annual
     taxable income at line 5 (See Chart 4)                –   1,521.00
(17) Provincial tax on income for Ontario
     (line 15 minus line 16)                               $   4,463.10
(18) Minus the provincial tax credits:
     • the total of personal tax credit
       amounts reported on Form TD1ON       $   8,943.00
     • the CPP contributions for the year
       based at line 1
       (annual maximum $2,163.15)*              2,163.15
     • the EI contributions for the year
       based at line 1
       (annual maximum $747.36)*                 747.36
     Total                                  $ 11,853.51




                                – A-68 –
     *Note
     When the maximum CPP contributions
     or EI premiums for the year is
     reached, use the maximum amount for
     subsequent calculations
(19) Multiply the total at line 18 by the
     lowest provincial tax rate for the
     year.                                     ×   0.0505
(20) Total provincial tax credits                           –    598.60
(21) Basic provincial tax
     (line 17 minus line 20)                                $   3,864.50
(22) Provincial surtax
     • where line 21 is less than or equal
       to $4,006, the surtax is $0




                                    – A-69 –
     • where line 21 is greater than $4,006
       and less than or equal to $5,127,
       the surtax is 20% of line 21 that
       exceeds $4,006                         $       0.00
     • where line 21 is greater than
       $5,127, the surtax is 20% of line 21
       that exceeds $4,006 plus 36% of
       line 21 that exceeds $5,127                    0.00
     Provincial surtax                                       +       0.00
(23) Total provincial tax including surtax                   $   3,864.50
(24) Ontario Health Premium
     Determine the premium based on the annual
     taxable income (line 5) and the explanation on
     page A-25 [9].
     The premium is equal to the lesser of:
     (i) $600 or



                                – A-70 –
     (ii) $450 plus 25% of taxable income greater than
          $48,000 and less than or equal to $72,000:          +    600.00
(25) Provincial tax payable before reduction
     (line 23 plus line 24)                                   $   4,464.50
(26) Minus the provincial tax reduction:
     The lesser of:
     (i) the total provincial tax payable at
         line 23, and                          $   3,864.50

     (ii) twice the applicable personal
          amounts shown in Chart 5
          on page A-74 [26]                    $    412.00
        minus the amount at line (i).          – 3,864.50
        If the result is negative,
        substitute $0                          $       0.00

                                                              –       0.00




                                 – A-71 –
(27) Provincial tax before labour-sponsored funds tax
     credit                                                $   4,464.50
(28) Minus the provincial labour-sponsored funds tax
     credit
     The lesser of:
     (i) $750; or

     (ii) 10% of the purchase of approved shares
          ($1,850 × 10% = $185.00)                         –    185.00

(29) Total provincial tax payable for the year
     (line 25 minus line 28)                               $   4,279.50

Calculate total tax and the tax rate for the commission employee
(30) Total federal and provincial tax deductions for the
     year: (line 14 plus line 29)
     If the result is negative, substitute $0.             $ 13,370.47

(31) Divide the amount at line 30 by the amount at
     line 1,                                                    0.1663

                                – A-72 –
    or rounded to                                                  0.17

(32) Multiply each gross commission amount by the tax
     rate percentage at line 31.

 Note
 If your employees who earn commission income amend their TD1 or
 TD1X forms, you will have to redo this calculation.

                              Chart 3
           2010 federal tax rates and income thresholds
  Annual taxable income ($)        Federal tax rate   Constant ($)
    From               To                    R             K
        0.00   –     40,970.00              0.15               0
   40,970.01   –     81,941.00              0.22         2,868
   81,941.01   –    127,021.00              0.26         6,146
  127,021.01   –     and over               0.29         9,956


                                 – A-73 –
                               Chart 4
            2010 Ontario tax rates and income thresholds
Annual taxable income ($)      Provincial tax rate     Constant ($)
  From                To                  V                KP
     0.00     –    37,106.00          0.0505                    0
37,106.01     –    74,214.00          0.0915              1,521
74,214.01          and over           0.1116              3,013

                               Chart 5
                  Ontario tax reduction for 2010 ($)
Basic amount                                                 206
Amount for each dependant under 18                           382
Amount for a dependant with a disability                     382




                               – A-74 –
                    Your opinion counts!
If you have any comments or suggestions that would help us improve
this publication, we would like to hear from you. Please send your
comments to:
 Taxpayer Services Directorate
 Canada Revenue Agency
 750 Heron Road
 Ottawa ON K1A 0L5




                              – A-75 –

				
DOCUMENT INFO
Shared By:
Categories:
Stats:
views:861
posted:7/20/2010
language:English
pages:77
Description: Federal Income Tax Deductions Ontario document sample