Why Are The Employers Of My Two Adult Children Not Deducting Federal Income Tax?
Oct.01, 2009 in
chalet
They are deducting cpp and ei but nothing else. We are in ontario. One works for swiss chalet and the other one works at a&w. They are both full time employees.
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October 1st, 2009 at 12:30 am
Whether or not it is illegal for the employer to not deduct CIT has already been mentioned; the main point is whether they will be assessed as owing tax at the end of the year.
If their income less deductions is over the $9600 personal limit, they will start being taxed at 15% of their income. If they make more than $38000 they rate on anything over that is 22%.
The exact brackets are listed at the government’s website (http://www.cra-arc.gc.ca/tax/individuals… and in the tax guides available at Post Offices which will be available along with tax return forms.
If this amount is not being deducted from their checks and the employer is not correcting a possible error (i.e. they filled that they were tax exempt when accepting the job), your children should put aside at least the equivalent of possible taxes in a savings account.
In this case, they will ideally be making up to 4% interest on the money as savings until they fill out their tax return, where they will be assessed the remainder of their taxes owing.
As a side note, remember that they should also be entering a reasonable amount in the “gratuities and tips” field of their return if they are in a tipped serving position. Since tips at quite a few restaurants will equal or exceed the low wage paid servers, the government does check that this income is reported.
October 1st, 2009 at 12:30 am
Are they both 40hr per week employees?
If their earnings will be under $9600 they would not be subject to tax and therefore its possible nothing would be withheld except cpp and ei.
October 1st, 2009 at 1:16 am
Ontario, Canada, or Ontario, California, USA? They are being treated as independent contractors when they are not, which is illegal in Canada, as well as in the United States.
October 1st, 2009 at 2:04 am
They both are in the restaurant business and probably earn a small wage plus tips. because it is impossible to know how much they will earn in tips their employers are not deducting any income tax on their tips but should be deducting it from their hourly wage. The employer can’t deduct anything unless the employee signs the proper forms giving them authorization . the income tax form also asks for information regarding marital status basic allowance etc check to see if they filled out a tax form
October 1st, 2009 at 2:10 am
It is likely that your children had advised their employers that they would not be subject to income tax, and thus no payroll tax withholdings, as they would earn less than $9600 for the year.
Canadian federal income tax is calculated based on taxable income, then non-refundable tax credits are deducted to determine the net amount payable. For 2007, every taxpayer can earn taxable income of $9,600 before paying any federal tax.
Canada Revenue Agency provides employers with TD1 Personal Tax Credits Return forms, both federal and provincial. Employees complete the federal form as well as the form for their province/territory of residence, indicating which non-refundable tax credits they can claim. The total of the claimable credits is then used to determine the employee’s federal or provincial claim code, which is used to calculate how much income tax will be deducted from their pay.
New employees complete the TD1 forms when they are hired, and are not required to complete them again unless they want to change their claim amounts. Completing the form allows tax deductions to be reduced if the employee is eligible for tax credits other than the basic personal exemption. Students can report their tuition, education and textbook amounts on this form to reduce their tax deductions. This form should be filled out when starting new employment, or when there is a change in your entitlement to personal tax credits. If no TD1 form is filled out, the employer will calculate taxes using only the basic personal exemption.