Chapter 4 - Income Tax Flashcards
TRUE OR FALSE: As a legislative requirement, employers must withhold federal and provincial/territorial income taxes from an employee’s employment income and remit these withholdings to the Canada Revenue Agency (CRA) according to a prescribed remittance schedule.
TRUE
subject to tax at source, at the time of payment
Employment income
_____ and ____ use the same method as the federal government to determine which types of remuneration are subject to income tax.
Nine provinces and 3 territories
this is defined in the Income Tax Regulations (ITR)
The method for calculating income taxes and the remittance schedules
The appropriate provincial or territorial tax rate to apply to an employee’s taxable income depends ______________
on the employee’s workplace location.
When an employee physically reports to work at an employer establishment they will have _________________
provincial or territorial income tax withheld for the jurisdiction in which that establishment is located.
When an employee works remotely but there is an employer establishment in their jurisdiction to which they would otherwise reasonably be required to report to work, or are considered attached to, they will have provincial or territorial income tax withheld ________________________.
for the jurisdiction in which that establishment is located.
The following types of remuneration are subject to income tax:
- salary, wages, overtime, retroactive payments, commissions and wages in lieu of notice
- taxable allowances
- bonuses, vacation pay and gratuities
- pensions, retiring allowances, severance pay and death benefits
- the value of any taxable benefits
The following amounts are tax-deductible and are subtracted to determine the net taxable income on which income taxes are applied:
- the enhanced portion of C/QPP contributions
- employee contributions to a registered pension plan (RPP)
- contributions to a Registered Retirement Savings Plan (RRSP)
- union dues (not applicable in the province of Québec)
- deductions for living in a prescribed zone, as claimed on the employee’s federal Personal Tax Credits Return – TD1; under the Income Tax Regulations, an area is a prescribed zone if it is in the Yukon, the Northwest Territories, Nunavut, Labrador or north of specified latitudes in the provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario or Québec
- deductions authorized by the Canada Revenue Agency (CRA)
TRUE OR FALSE: When an employee does not work on the employer’s premises and is paid from the employer’s business located outside Canada, the employee does not pay provincial tax but is taxed using a tax rate for employees working in Canada beyond the limits of any province/territory or outside Canada.
TRUE
Remuneration subject to income tax includes _______________
earnings plus the value of any taxable benefits and allowances.
______ are subtracted from taxable remuneration to determine the net taxable income on which income taxes are calculated.
Tax-deductible amounts
Enhance portion of CPP contributions include two values:
- Any contributions on YMPE above the pre-enhancement contribution of 4.95% of contributory earnings
o The enhanced portion will be 1% of contributory earnings for 2024 - The 4% contribution on pensionable earnings greater than YMPE up to the YAMPE that begins in 2024
An amount equal to the ___________ is deducted from remuneration to determine net taxable income.
enhanced portion of CPP contributions
There are some situations where you cannot use the payroll deductions tables to determine the amount of income tax to withhold at source. These situations include when an employee:
- reports a claim code ‘X’ on their federal or provincial/territorial TD1 forms
- is claiming labour-sponsored funds tax credits
- earns more than the maximum amounts provided in the payroll deduction tables
