Question

1. Review the following situations and determine the employee’s net pay by figuring out what earnings & benefits are subject to Income Tax, Canada / Quebec Pension Plan, Quebec Parental Insurance Plan (if applicable) and Employment insurance. Make sure to reduce net and taxable income by any applicable voluntary/non statutory deductions as well. All rates should be based on 2019.

1. Lawrence works in Alberta and is paid on a bi-weekly basis. He has a claim code of 1 on both his TD1 and TD1AB. He has the following type of earnings, benefits & deductions. He will not max out on CPP or EI this pay and will have full deductions.

1. Regular $2000
2. Vacation Pay $1000
3. Group Life – Employer paid Taxable benefit $25
4. RRSP contribution $150
5. Coffee Fund $5

Calculate Lawrence’s pensionable, insurable and taxable amounts. Then calculate CPP & EI deductions and look up the corresponding federal and provincial tax amounts in the tax tables based on his province, pay frequency and claim codes. Once all deductions have been calculated figure out the net pay.

2. Celine works in Nova Scotia and is paid on a semi-monthly basis. She has a claim code of 2 on both his TD1 and TD1NS. She has the following type of earnings, benefits & deductions. She will not max out on CPP or EI this pay and will have full deductions.

1. Regular $4000.00
2. Overtime $500.00
3. Parking – Employer paid Taxable benefit $50.00
4. RPP contribution $300.00
5. Union Dues $25.00

Calculate Celine’s pensionable, insurable and taxable amounts. Then calculate CPP & EI deductions and look up the corresponding federal and provincial tax amounts in the tax tables based on her province, pay frequency and claim codes. Once all deductions have been calculated figure out the net pay.

Answer 1

Question 1:-

CPP deductions:

Basic pay-period exemption (bi-weekly) = $3,500 / 26

                                                                       = $134.615

Total pensionable amount = $2,000 + $1,000 + $25 + $150 + $5

                                               = $3,180

CPP deductions = ($3,180 - $134.615) X 5.10%

                            = $155.31

EI deductions:

Total insurable amount = $2,000 + $1,000 + $150

                                          = $3,150

EI deductions = $3,150 X 1.62%

                        = $51.03

Total income = $3,180 X 26

                       = $82,680

Deduction of claim code 1 = $19,369

Taxable amount = $82,680 - $19,369

                             = $63,311

Net pay = ($47,630 X 15%) + [($63,311 - $47,630) X 20.5%]

              = $10,359.11

Question 2:-

Dear Student, here you have the answer to this question:

Celine's wage income $ 4,500.00 (4,000 + Overtime 500)

(+) Parking - Employer paid Taxable benefit $50.00

(-) RPP Contribution = $ 300.00

(-) Union dues = $ 25.00

Taxable income for the pay period $ 4,225.00 (Income - Union dues - Employee contribution to RPP + Parking)

Pensionable earnings for the pay period $ 4,550.00

• Federal Tax deduction $ 657.95 (According to the Federal and Nova Scotia provincial tax deductions tables for CC2 - 2019)
• Provincial Tax deduction $ 539.17 (According to the Federal and Nova Scotia provincial tax deductions tables for CC2 - 2019)
• Canada Pension Plan deduction $ 224.45 (According to the CPP contribution tables - 2019)
• EI deductions $ 73.71

Total deductions $ 1,495.28

Net Payment $ 2,679,72