Edo

Hello all, I took up my first ever job in Canada in May 2013. Prior to signing the contract my employers sent me a tax breakdown calculation for my annual package to work out my take home. However when I rceived my last payslip of the year in December 2013 I relaised that I paid a lot more tax than what my employers calculated for me at the beginning. I have checked on various online tax calculators and they confirm that to be the case. I will of course know the actual situation once I receive my T4.

I was under the impression that I might have overpaid due to started working half way through the financial year and the numbers might come to 'normal' once the new tax year begin however, there hasnt been much difference in the January 2014 payslips as my take home hasnt changed much from the previous year even though my package is still the same. So its either the online tax calculators/my emplyers' initial assessment that was wrong, or our payroll/the taxman has got the basis of my tax calcultaions wrong in their system. Any advice on how can I sort it out please?

Aviator

Your 2013 tax will be taken care of when you file taxes for 2013 this year. Your T4 will have the tax paid, you file your return and would get a refund if overpaid.

If your employer is using a payroll system, asked them to check they have your exemptions entered correctly and that you filled in your TD1 and TD1 provincial correctly.

This is the CRA online calculator some employers use. https://apps.cra-arc.gc.ca/ebci/rhpd...o?lang=English

The 'tax man' won't have it wrong, it will either be your employers payroll data that is wrong or their initial assessment. It is something your employer needs to sort out.

JonboyE

The tax tables Canadian employers have to use assume that the amount you are paid on each pay cheque is the same as every other pay cheque for the year. E.g. if you get $2,500 each half month the tax calculation will be based on $60,000 a year. It will work out tax on $60,000 a year then divide it by 24. It is not sophisticated enough to take into account that, if you only started work half way through a year, your marginal rates will be lower than someone who has worked all year. You will likely get a refund when your file your 2013 return.

It is expected that your net pay will be the same this year on each paycheque - now it should be about right for the whole year.

Edo

Well, still getting a lot less as compared to what the tax websites say or what my employers calculated it on the tax breakdown sheet last year

iaink

My guess is that you did overpaid because you started in May.

EI and CPP are taken as a fixed % and then max out partway through the year if you earn a decent wage. If you didnt max out contributions because of your "late start" your take home since Jan will be the same, until you max out EI ad CPP contibutions later in the year. After that your take home jumps for a while until the new year rolls around and hopefully everything comes out in the wash.

Once you do your taxes for 2013 you will get a rebate for the overpayment. If your think your deductions are way out to lunch you simply give a TD1 and TD1(P) form to your work so they can adjust how much is deducted at source in order to avoid making interest free loans to the government, but if you are single / no kids / no rrsp contributions the default values will work close enough for a 12 month period. If you have a wife / kids/ non or low earning partner etc and never filled out the TD1 forms then its possible that you have paid a lot more tax than you should / could have.

Why they do this uneven EI / CPP fixed percentage followed by 0% deduction over the year beats me.

iaink

Except that EI and CPP will max out in (September or October?) and take home in the fall will jump by a few hundred a month, until its reset again in the new year.

montreal mike

bear in mind that your personal exemptions are pro-rated so you might not have overpaid that much

at least that was the way it was

perhaps it has all changed

Edo

Yes, this also happened to me around October time and they stopped deducting EI and CPP. However the main taxes kept getting deducted as before and still are.

Edo

I tried to calculate my tax on this website but the amounts it gave me dont seem to be right. Dooes anyone know any other reliable tax calculators please?

JonboyE

That is the official one. You can't get any more reliable than that.

Shirtback

File your tax return as soon as you can. If you get a significant reimbursement, check/amend TD1(the tax form you filled in for your employer when you started work) Bingo ! :-)

Aviator

That is the right one (the only one that you can be sure is 100% correct), it is the CRA tax table employers use directly from CRA. If it differs to other ones, the other ones are wrong.

Edo

But this calculator doesnt let you calculate taxes on your annual income. It only lets you calculate your monthly/weekly pay etc

Shirtback

You are receiving pay slips from your employer, right? Can't you extrapolate/estimate?

Also, contributory health insurance/union dues/pension deductions (to name but a few, depending on province) may skew your calculations.

I find Canadian (Federal & Provincial) income tax returns reasonably easy to complete, & if you have overpaid, you will be reimbursed, & able to readjust for the future once you receive 2013 notice.

Edo

I did estimate it on the basis of my monthly payslips and the net amount slightly varies from what I got paid but thats not the issue. What I am actually trying to work out is what I should have paid on my yearly income, considering I didnt start working in Canada until May 2013.