Canada Withholding Taxes
Canadian federal tax tables and tax withholding formulas change every year.
Click the link to download the latest Canadian payroll tax tables for 2021.
Click the link for more about Goldenseal payroll accounting software.
Canadian Payroll Taxes
Canadian users need to handle three federal payroll taxes:
Canada Pension Plan (CPP)
The CPP deduction is a simple percentage on wages. It includes a cutoff amount (in the Tax Item) and a deduction amount (in the Tax Table). There are two tax items-- one for the employee withholding amount, and one for the employer tax.
Employment Insurance (EI)
The CPP deduction is a simple percentage on wages. It includes a cutoff amount (in the Tax Item). There are two tax items-- one for the employee withholding amount, and one for the employer tax.
Income Tax Withholding
In order to calculate federal and provincial income taxes correctly, you will need to enter exemptions and tax credit amounts into each employee ’s account. Here is how to calculate the amount for each field in the Employee account record:
K1 Personal tax credit
Take the amount claimed by the employee as Tax Credits according to the “Total of personal tax credit amounts” on Form TD1. Multiply it by 0.16 and enter it into the Federal Dollar Amount field in each employee account. This amount is K1, the non-refundable personal tax credit (see your tax booklet for more information).
Any other federal tax credits must be entered as an annual amount in the Local Dollar Amount field in the employee’s account. This amount is K3 (see your tax booklet for more information). Examples of these are medical expenses or charitable donations authorized by a tax centre or tax services office. If the employee does not claim any other federal tax credits, leave the amount in this field as $0.00.
Tax Factors F, F2 and U1
Enter the sum of all amounts claimed by the employee for tax factors F, F2 and U1 into the State Dollar Amount field in each employee’s account. This is an annual amount-- to convert a weekly amount to annual, add the factors per pay period and multiply by 52 or 53 (the number of pay periods this year).
Tax Factors F1 and HD
Enter the annual sum of amounts claimed by the employee for tax factors F1 and HD into the Other Dollar Amount field in each employee’s account.
TD1 and TD3 deductions
Any additional tax deductions per pay period the employee requests on Form TD1 or Form TD3 should be entered as an amount per period in the Tax Item “L: Additional Deductions”. The amount should be entered into the amount field to the right of the “Calculation Method” popup in the Tax Item’s window. Additionally, to enable this factor’s deduction you must edit the appropriate Tax Package to include it by placing a check mark next to the “L: Additional Deductions” tax item in the edit tax package window.
Any amounts for LCF, the labour-sponsored funds annual federal tax credit, must be entered in the
Tax Item “LCF: Federal labour-sponsored”. To determine the amount to use for LCF for each employee, take
the lesser of:
For further details on the Canadian payroll systems, please refer to the following publications from the Canada Customs and Revenue Agency:
These publications are available from the Canada Customs and Revenue Agency and can be ordered at the following toll-free number: 1-800-959-2221 , or from their website at www.ccra-adrc.gc.ca.
Canada federal and provincial withholding taxes use the same rate for single and married employees, so it doesn't matter what you use in the Marital Status field in each Employee account record.
Tax Forms-- 800 959-8281
Revenue Canada Taxation