Tax deductions look incorrect
The tax deductions for my employee doesn't look correct. Why aren't taxes being deducted and what are the common causes for deductions being incorrect?
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Tax and other deductions look wrong
If you've noticed that some of the deductions aren't correct or aren't being applied at all for your employees, there are a few things you can check:
- Ensure that your employee has not been set to 'exempt' for deductions like tax, CPP, EI, QPIP etc. Go to EMPLOYEES -> edit the specific employee
- Ensure that the earnings code you are using for this employee includes taxes, CPP, EI etc.
Go to
-> Pay Rules and check the EARNINGS tab
- Check to see that your employee payments aren't below the TD1 exemption amounts provided by the Canada Revenue Agency and their province / territory of employment. Typically, the system will annualize the earnings for an employee and if the total amount is under their exemption limit, then no taxes will be deducted. Time-based staff are not annualized (the system can't predict the hours they will work) so if a particular run is below their TD1 threshold, no taxes will be withheld.
- Is your employee exempt from certain government programs? For example if they are under 18 or over 70 they may not need to contribute to CPP.
- If you are comparing numbers to other payroll calculators (like the CRA website) please keep in mind: 1) The CRA calculator will not have historical CPP/EI information to use when applying its calculations (unless you have explicitly entered them) 2) The TD1 values used by the CRA calculator use ranges rather than the exact figures used in your payroll profile.. 3) The system will estimate the annual income of an employee and apply the correct tax calculations based on any income to date. If a $50K/year employee is hired and paid in Dec - the taxes deducted will correctly reflect earnings for Dec only. If the $50k/year employee is hired in Jan, the system will estimate the annual income and apply the correct tax calculations. The CRA calculator will not have this history and can only provide an estimate of the taxes. 4) The CRA calculator will not take into consideration any custom pay rules you may have created - many of these rules have tax implications which the service will correctly adjust for.
- A further note from one of our accountant partners on how to confirm this difference, "The CRA tool uses claim codes rather than dollar values. I worked out to get the same result as the CRA tool you need to take the midpoint of the code range. This now made the PE calculation the same as the CA calculation."
- Is it a new tax year? Tax tables have been changed and CPP and EI values have been reset.
- Ensure that your employee has not been set to 'exempt' for deductions like tax, CPP, EI, QPIP etc. Go to EMPLOYEES -> edit the specific employee
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