As the year comes to a close many Canadians are taking advantage of year-end tax planning strategies to minimize their tax liabilities for 2017.
While this is a critical step for every taxpayer, it is also important to look into the coming year and start preparing for the 2018 tax planning season, as taxpayers will begin paying for their 2018 income taxes the moment they receive their first paycheque of the year.
From an individual’s perspective, the process is relatively straightforward – your employer deducts the necessary taxes and statutory deductions, such as CPP and EI, directly from your paycheque.
From the employer’s perspective, however, it can be a bit more complicated, as you have to determine how much tax to remit from each employee – afterall, every employees tax situation is unique.
Luckily there is a tool that can help employers and employees with this task – TD1 Forms.
TD1 forms help determine how much tax should deduct off an employees paycheque based on the tax credits and deduction they believe they will receive. From the employee’s perspective, filling out a TD1 is beneficial as it helps ensure they are paying the most accurate amount of tax possible. There are two TD1 forms that should be filled out by every employee – a federal and a provincial/territorial one.
To find copies of the forms, you can visit the Canada Revenue Agency’s (CRA) website.
Do Employee’s Need to Fill Out a TDI Form More Than Once?
While TD1 forms are often used when an employee starts working for the company, circumstance change from year to year that can create a need for new TD1 Forms. Some examples include, but are not limited to:
- A new baby
- A child starts post-secondary school
- A taxpayer turns 65
- An elderly or disabled parent/relative moves in
Because of this, it is recommended that you have employees review their TD1 form each year, and fill out a new one if something has changed. This will ensure the correct amounts of taxes are being deducted each year.
What If an Employee has Deductions Not Included on The TD1 Forms?
If an employee has deductions, such as RRSP contributions, deductible support payments and care expenses, that are not included on the TD1 Forms, they can still request that taxes are reduced at the source. This can be done by filling out a T1213 Form.
Unlike the TD1 Forms, once an employee has filled out the T1213 Form, they must send it to the CRA. After verifying the information on the form, the CRA will send a letter to the employer, authourizing the reduction.
The T1213 process can take time so the sooner your employee fills out and files the form, the better.
For more information on reducing taxes deducted at the source for employees and employers, contact us today. We would be happy to help you with this and any other tax questions you may have.
