hi folks,
i have the chance at moving to toronto to work, been offered job on temp work permit.
i have been looking into all the deductions off my gross salary. please can any local confirm the following:
canada tax, local state tax, EI ($800pa), CPP ($3500pa), RSSP.
any others i should know, and payment levels if above are wrong.

thanks

A little research on http://www.taxtips.ca/calculator/cdncalculator.htm will answer all your questions.

Er, province not state.

There is a taxtips website which has a calculator for federal and provincial taxes. It will also give you the exact values for EI and CPP - your EI value is about right but CPP is lower than your value I think.

RSSP is up to you - there is a max limit based on your previous years tax return.

Most jobs come with a contributory health/dental/eyecare scheme - costs will vary but without it items like dental bills and some prescriptions could be expensive. Depending on the level of cover you might be looking at $70pm.

Jobs I've seen in Canada generally come with less in terms of life insurance and long term sickness so if you wanted them you might have to pay through a deduction in your salary.

Your basic pay deductions are:

Federal / Provincial Income tax
CPP (pension)
EI (unemployment insurance)


Typically tax deductions are based on being single with no kids. There are forms to fill out to correct tax deducted at source if you can get additional allowances for being married or having kids under a certain age, if you dont bother then you will get a refund when you file your return for the difference, plus whatever other adjustments are made for medical expenses, kids sports, home renovations, investment interest, RRPS contributions etc etc etc.

Some employers offer RRSP matching / contrbutions, which will affect your taxable income and could show on your pay stub.

Holiday pay is a common deduction, you pay 2% into your holiday account and when you take vacation the account pays out. If you havent saved enough to cover your absence then you go short. Its more common for hourly workers than salary staff.

Some employers may take deductions to cover some aspects of the health benefits package.

Its important to note the EI and CPP are deducted at a fixed % rate, but max out once a certain threshold is reached, its not split over the full year, so if you earn enough to reach the threshold (and why would you come to Canada if you dont!) then there comes a point in the year when your take home pay jumps up, at least until Jan 1 rolls around again.


The calculators at taxtips.ca are among the more accurate ones out there.

thanks for the replies,
yes my mistake ... provinces.
i am married with one child (6), didnt know about the holiday pay tax, i am getting medical cover but i dont know if it covers the family.

thanks again.

Holiday pay isnt a tax, its just a way (some) canadian employers deal with paying (mostly hourly) employees when they take time off by deducting a percentage and withholding it until you have it paid out.

The thing most likely to catch you out is that EI and CPP are not split into equal monthly components, you pay a larger % than you probably expect at the start of the year and when the total paid maxes out later in the year your take home pay jumps at that point until you start the cycle again in the new year.

Claiming for the married tax allowance only makes sense (to me) if your OH is not working, its less than the sum of two single allowances.

Your medical benefits should cover your immediate family, if both parents have benefits then it gets a little more complicated as to whose insurance covers the kids first. Your HR department should be able to explain it. If they are talking about temporary coverage to cover the three month wait for provincial coverage to kick in, then make sure they cover your whole family. Some work permits dont meet the requirement to cover spouses under OHIP (Ontario health coverage)...you might want to check that out for your circumstances too, you dont want to be here without coverage!

iaink,
thanks for the clarification.
if i was starting in canada in july i would pay tax when i started or would it be at the end off 2010?
the canadian system is confusing sorry for all the questions.

alan

In my experience, the onus is usually on the employee - ie. they pay you a certain tiny percentage extra with each pay packet which is your holiday pay...then don't pay you at all for when you actually are on holiday (the idea being that you're supposed to have been saving that 4% of your pay to use when you do take your 2 weeks vacation...which I doubt ever happens).

Really? We withhold the deducitons automatically. The side effect of this is that when you get an extra weeks vacation for "time served", your take home pay goes down as they need to cover the extra week off!

The other side effect that sucks is if you are laid off we legally have to pay it out to you, which the EI people take note of, plus when people come back to work afterwards their holiday pay account is empty, which sucks when they want to take time off. Lose lose situation.

You basically pay at source from when you start working, but the tax retun would be submitted at the end of the year for 2010 (Usually it takes till Feb or march 2011 for you to be issued with all the necessary tax certificates such as your T4 form, so you cant likely file before then anyway)

You would pay EI and CPP totals prorated for the 6/12 months of the tax year you were in Canada I believe, but it would probably be a case of claiming it back with your year end return as few payroll systems are smart enough to track the prorated amount and stop taking it once that level was reached. Your tax allowances would also be prorated IIRC, but again, payroll is unlikely to figure that out either, so you will likely overpay and have to claim it back...worth talking to HR about though to see if they can sort it out for you, no point in overpaying if you dont have to!

Same thing happens when you change jobs mid year FWIF, the new payroll system likely starts at zero contributions for the year so you end up overpaying once you reach the max cutoff for the year because the system simply doesnt realise what you have paid already

I think there is something a little dishonest about this practice.

I dont think so. In practice they likely get an annual raise about the same time their vacation allowance goes up anyway.

Worst case their annual take home pay stays the same and they get an extra week off. It beats Mr Lees scenario where you are expected to keep 4% yourself, which as he said, never happens.

The only unfair part of the scheme is you basically have to have worked and paid into it for at least a year before you take the time off in order to have the full amount there to pay out, but I suppose thats fair enough. All things considered its better to be salaried though!

I've heard of Canadian companies that pay salaries pro-rataing peoples salary downwards by the extra day when they are given an extra days vacation.

Thats just dbd isnt it Oh no, maybe not, he probably doesnt allow vacation days