Question

Payroll. Canada. In your own words, explain why and how an employee would:

request additional tax deductions at source

apply for a reduction in tax deductions at source

Answer 1

Request additional tax deductions at source

?WHY?

• To reduce the tax liability of paying at once during return filling

HOW?

• Fill out the section Additional tax to be deducted on page 2 of the Canada Revenue Agency formPersonal Tax Credits Return (TD1).

• If one had made a previous request for additional tax deductions, they have to enter the total amount of the additional deduction requested, including the amount previously requested, since the process of a new request for the current year prevails over the previous request.

• Fill out the identification section in the form

• The additional amount should not be include basic tax amount

Apply for a reduction in tax deductions at source

Whenver the new tax credits are available and an employee wish to have more cash in hand from the salary, they can request fro reduction in TDS.

Steps are:

• Complete and submit to the CRA Form T1213, Request to Reduce Tax Deductions at Source.
• This form requests permission from the CRA for employer to use the deductions employee will be entitled to, in order to reduce tax withholdings in that particular year.
• If approved, the CRA will provide a Letter of Authority (typically within four to six weeks of submitting Form T1213) that would be provided to employer as confirmation to reduce tax withholdings.
• One can also use Form T1213 to request a reduction in tax deductions at source for certain non-refundable tax credits that are not part of Form TD1, such as foreign tax credits, which Form T1213 does not provide implicitly for.
• Note that the CRA will not usually issue a Letter of Authority if you have a tax balance owing or have not filed outstanding income tax returns.