Chapter 4 - Income Tax Flashcards

1
Q

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.

A

TRUE

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2
Q

subject to tax at source, at the time of payment

A

Employment income

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3
Q

_____ and ____ use the same method as the federal government to determine which types of remuneration are subject to income tax.

A

Nine provinces and 3 territories

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4
Q

this is defined in the Income Tax Regulations (ITR)

A

The method for calculating income taxes and the remittance schedules

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5
Q

The appropriate provincial or territorial tax rate to apply to an employee’s taxable income depends ______________

A

on the employee’s workplace location.

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6
Q

When an employee physically reports to work at an employer establishment they will have _________________

A

provincial or territorial income tax withheld for the jurisdiction in which that establishment is located.

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7
Q

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 ________________________.

A

for the jurisdiction in which that establishment is located.

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8
Q

The following types of remuneration are subject to income tax:

A
  • 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
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9
Q

The following amounts are tax-deductible and are subtracted to determine the net taxable income on which income taxes are applied:

A
  • 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)
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10
Q

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.

A

TRUE

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11
Q

Remuneration subject to income tax includes _______________

A

earnings plus the value of any taxable benefits and allowances.

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12
Q

______ are subtracted from taxable remuneration to determine the net taxable income on which income taxes are calculated.

A

Tax-deductible amounts

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13
Q

Enhance portion of CPP contributions include two values:

A
  • 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
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14
Q

An amount equal to the ___________ is deducted from remuneration to determine net taxable income.

A

enhanced portion of CPP contributions

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15
Q

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:

A
  • 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
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16
Q

The Worksheet for the Personal Tax Credits Return – TD1-WS is used to calculate partial claim amounts on the TD1 for:

A
  • the basic personal amount (for high-income employees)
  • age
  • Canada caregiver amount for eligible dependant or spouse or common-law partner
  • Canada caregiver amount for dependant(s) age 18 or older
17
Q

code ___ is used for non-resident employees not entitled to personal tax credits or employees who have another job and have already claimed their basic personal amount on the TD1 they filed with their other employer.

A

0

18
Q

used by the employer to determine the amount of federal and provincial or territorial income tax to deduct from an individual’s employment income or other income, such as pension income.

A

The total claim amount or the claim code on the federal and provincial Personal Tax Credits Return – TD1 forms

19
Q

true or false: Employees are required to complete the provincial/territorial tax credit return form that corresponds to their province or territory of employment or province/territory of residence in the case of a pensioner.

A

TRUE

20
Q

The methods available to calculate income tax deductions are the following:

A
  • Payroll Deductions Tables
  • Payroll Deductions Online Calculator (PDOC)
  • Manual method
  • Formula method for payroll software
21
Q

If the employer has unusual pay period frequencies, such as hourly, daily (240 working days), or 10, 13, or 22 pay periods a year, the CRA’s publication, ________________ should be used

A

Payroll Deductions Supplementary Tables – T4008,

22
Q

If the employer is located outside Canada and does not have a location in Canada, the CRA publication Payroll Deductions Tables – Income tax deductions - ____________________ is used.

A

In Canada Beyond the Limits of Any Province/Territory or Outside Canada – T4032OC

23
Q

program available on the CRA’s website; users are not required to download or install the program to use it. PDOC calculates Canada Pension Plan (CPP) contributions, Employment Insurance (EI) premiums, and federal and provincial/territorial income tax withholdings for a regular salary, paid vacation, pension income, bonuses, retroactive pay and commissions for all jurisdictions, except Québec.

A

Payroll Deductions Online Calculator (PDOC)

24
Q

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:

A
  • 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
25
Q

In these situations, the manual method must be used. This method involves the following three stages:

A
  • determining the annual net taxable income
  • calculating the federal tax on the taxable income
  • calculating the provincial tax on the taxable income
26
Q

TRUE OR FALSE: If the employer calculates the tax using this manual method, the dollar value of the total claim amount (line 13 federally and line 11 provincially/territorially) from the employee’s TD1 form is required.

A

TRUE

27
Q

used by organizations that process their payrolls using an in-house software program. It is also the method payroll service providers use to process their clients’ payrolls.

A

formula method

28
Q

There are currently two formula options for the payroll deduction formulas for computer programs. The option selected will depend on the following:

A
  • computer system configuration
  • the memory capability of the system
  • nature of the payroll
29
Q

employees who expect to receive a large income tax refund when their income tax is assessed may apply to the CRA, using a ________

A

Request to Reduce Tax Deductions at Source – T1213