could anybody tell me about tax deduction from pay check in canada ?? rest in detail plz ??

Question

please explain me about
1) tax deduction in canada
2) %age of tax deduced
3) tax brackets
4) RRSP help in tax


thanks please advice me some good website where i can check all this stuff ..but for better understanding please explain me little bit before that ...
thanks in advance

Answer 1

Basic payroll deductions in Canada include:

Canada Pension Plan (CPP), Employment Insurance (EI), and Federal and Provincial Tax

For 2007:
CPP contributions (except for Quebec) are 4.95% of earnings between $3500 to $40,200 for a maximum contribution of $1,989.90 for the year Note: Your employer will match your contributions to CPP

EI contributions are 1.8% of all earnings up to $40,000 for a maximum contribution of $720 for the year Note: Your employer will remit 1.4 times the amount of your remittance

Taxes - Canada works on a progressive tax system which means that lower income earners pay a lower percentage of tax than higher income earners. Upon being hired, an employee is required to fill out a TD1 form which outlines personal information for various tax deductions. Provincial taxes vary across provinces.

Attached are links to Canada Revenue Agency (CRA) payroll deductions as well as federal tax rates and each provinces tax rates.
http://www.cra-arc.gc.ca/tax/business/topics/payroll/employee/what/menu-e.html

http://www.cra-arc.gc.ca/tax/individuals/faq/taxrates-e.html

RRSP - when an individual makes a RRSP contribution they deduct the contribution amount from income to arrive at taxable income (the amount of income that is taxed) hence decreasing the amount of taxes payable in that year. An individual is taxed on RRSP's when they withdraw them. There are conditions that must be met, maximum contributions allowed, etc. The best way to proceed to understand the process is to read through the following link.
http://www.cra-arc.gc.ca/tax/individuals/topics/rrsp/rrsps-e.html

One more link to the CRA's Online payroll deductions calculator. This link will allow you to enter in various types of pay (including salary), type of payroll (monthly, semi-monthly,etc) and calculate what your current deductions should be and resulting net pay.
http://www.cra-arc.gc.ca/eservices/tax/business/pdoc-e.html

Hope this helps!

Answer 2

Any employer is REQUIRED by law to deduct the correct amount of taxes. They can deduct more if you ask (say, if you have 2 jobs) but not less. You fill out the TD1 to say how much tax you should expect to pay. You can list dependants, marital status, etc. It is an offense to lie so you pay less (i.e. claim dependants that you do not have). Many people claim less ( single instead of married with kids) to get a refund at tax time as a sort of "bonus". they're just giving you back your own money.

Everyone has to pay UIC and CPP (Unemployment insurance and Canada pension Plan). In Quebec, there's QPP instead. Typically, it's up to $1800 for CPP and $800 for UIC (renamed EI to give it a better "PR").

The government publishes tables and computer formulas for caculating how much tax to take off. basically, assume that the amount you made for the week/2 weeks/month is the same for the whole year, figure what the yearly tax would be, and apply the right proportion of taxes to this amount. (I.e. if it's weekly pay, figure it's 1/52 of what you would pay taxes if you made the same amount every week for the year). this s u c k s when you get a bonus or vacation pay, since let's say one week you got a $3000 bonus. tax is deducted as if you made that same $3000 every week for a year - usually near the top bracket.

The tax brackets are available on the web. For the first approximately $9000per year you pay no tax. It goes up from there, depending on the province. Typically, in a top tax backet ($110,000 or over) you pay almost 50% on the amount over that.

The average person in a well-paying job ($50K or so) pays about 1/4 to 1/3 of their income in tax depending on deductions. Unlike the USA, mortgage interest is not deductible (best to pay off that house right away!). However, lottery and casino winnings are tax-free. Canadians coming back from a lucky weekend in Vegas can ask for their withholdings back from the US revenoors once they reach Canada.

RRSP is like American IRA. The money you put into an RRSP is deducted from taxable income. (So, say you put in $3000 - you will get a refund of about 40%, depending on tax bracket, or say about $1200 at income tax time) This is better for people in highertax brackets. If you are in a regular employer deduction plan, they might allow for this deduction and reduce the tax deducted. If a bank does it on your account, you don't get the refund until tax time. You can put in up to 18% of your income, up to $12500 max, each year. Unused room carries over.

The money in an RRSP grows tax-free. This is good. If you had $10,000 and made say, $2000 in the stock market one year, you would pay up to 46% in taxes on that. In a tax-free RRSP, the whole amount stays in there. Nothing is free, though - they get you when you take it out. So, it grows faster, but eventually it will all be taxed.

RRSPs are for retirement, but you can take them out any time. If you do, you pay taxes. So, if you have a good income, you'll pay top dollar in taxes. If you have no job, or are retired with almost no other income, the taxes should be much less. If you die, your estate pays taxes as if the whole thing came out that year, and it goes to your heirs.

The idea is to put money in when you have high taxes, and take it out when you have low taxes. There are also rules about when you have to convert it to something that pays out, by age 69. You can also put money into an RRSP belong to a spouse - you save taxes, she pays when taking it out.

Answer 3

Uic Payroll