Monthly Archives
July 2019

DO YOU HAVE A TD1 PROCESS IN PLACE?

by Kimberley Fiume | on Jul 29, 2019 | No Comments

It’s a great question, and if the answer is no we encourage you to develop a TD1 process.  In fact, it is a best practice for organizations to have such process to ensure legislative obligations are in place in relation to deducting prescribed income taxes from your employees.

On Boarding / New Hire Package

As a first step, the TD1 forms (federal and provincial including Quebec Form TP-1015.3-V, Source Deductions Return) should be part of your new hire or onboarding package.  It is important that you communicate and remind employees about their obligations in terms of changes to their personal tax credits.  Onboarding and year-end are great opportunities to do so and fits nicely in terms of deploying an annual TD1 process.

You should explain to your employee that they must fill out federal and provincial (if applicable) TD1 forms and return them to Payroll/HR once complete.  A provincial TD1 form is required if more than the basic personal amount is claimed on the federal form.  The forms are used to establish income tax withholdings and both CRA and RQ will review the forms in a payroll audit.  Make sure you have a timeline for the forms to be returned to Payroll. If your employee does not fill out a TD1 form, use the code that corresponds to the basic personal amount.

You should let your employees know that if they have more than one employer or payer at the same time and have already claimed personal tax credit amounts on another TD1 / TP-1015.3-V form, the employee cannot claim them again. If the employee’s total income from all sources will be more than the personal tax credits claimed on another TD1 / TP-1015.3-V form, they must check the box “More than one employer or payer at the same time” on page 2 of the TD1 form, enter “0” on line 13 on page 1 and not fill in lines 2 to 12. On the Quebec provincial form the employee should proceed to line 10 on the form and enter “0”.

As an employer, you must collect completed forms on the basis of the employee’s province of employment.  In particular you should know how to deal with and be able to explain to your employee what to do if the employee lives in one province or territory and works in another.

An employee who lives in one province or territory but reports to your place of business in another province or territory might have too much tax deducted. If so, they can ask you to reduce tax deductions by getting a letter of authority from the appropriate Taxpayer Services Regional Correspondence Centre. Your employee will have to give you a letter of authority from a tax services office in order for you to reduce remuneration on which you have to deduct tax.

To obtain a letter of authority, the employee has to send Form T1213, Request to Reduce Tax Deductions at Source, or a written request to the appropriate Taxpayer Services Regional Correspondence Centre. For a complete list of these centres and their address, go to Letter of authority and click the link “Where to send the request“. The employee should include documents that support their position why less tax should be deducted at source. CRA will usually issue a letter of authority for a specific tax year. If an employee has a balance owing or has not filed outstanding income tax and benefit returns, CRA will not usually issue a letter of authority.

Similarly, a Quebec employee may request a reduction of tax at source and must apply to Revenu Quebec.  The employee will need to complete and submit a completed TP-1016-V form, Application for a Reduction in Source Deductions of Income Tax.

Keep all letters of authority with your payroll records in case of audit.

There might be situations where an employee might not have enough tax deducted, again as a result of living in one province and working in another. In these situations, the employee should ask to deduct more tax by filling in the “Additional tax to be deducted” section of a new Form TD1, Personal Tax Credits Return and or line 3 Additional tax section of the TP-1015.3-V and returning Payroll.

Employees can choose to have more tax deducted from the remuneration they receive in a year. To do this, they have to provide a federal Form TD1 and TP-1015.3-V to their employer that shows how much more tax they want deducted. This amount stays the same until they give their employer a new TD1 form and or Quebec equivalent.  Quebec also publishes form TP-1017-V, Request to have additional income tax withheld at source.  The Quebec employee may use this form to request additional provincial income tax, or to cancel a previous additional tax request.

Similarly, you should advise part-time employees that it could be beneficial to have more income tax deducted from the remuneration they receive. The employee may be able to avoid having to pay a large amount of tax when they file their income tax and benefit returns, especially if they have worked part-time for different employers during the year.

Finally, remind the employee that they should fill out new TD1 forms within seven days of any change that may result in a change to their personal tax credits for the year. For Quebec, a new form is required within 15 days of any change/s to their personal tax credits.

Year-End Communication

As part of year-end communications, let employees know that they do not have to fill out new TD1 forms every year if their personal tax credit amounts have not changed. Inform employees that a new form is required to be completed if their personal situation has changed, or they wish to change any of the personal tax credits they are claiming.

Options for your communication:

  1. Communicate to all employees that new TD1 forms are only necessary if there have been changes to their personal situations.  The payroll system then reverts all employees claim amounts to new basic claim amount with the first pay of the new year.  You will need to validate with your system or service provider what functionality exists from a TD1 perspective.  Some system functionality will also allow for automatic indexing of claim amounts.
  2. Some employers extract basic claim data from their system through business intelligence reporting and then structure the communication to those employees claiming other than the basic claim amount.  Communication should include advising these individuals to complete new forms and submit to Payroll for processing prior to the first pay of the new year, otherwise their claim amount will be reverted to basic. As above you will need to review your system functionality in terms of TD1 resets.

Electronic Forms

Do you make TD1 forms available electronically?

Hopefully you answered this question with Yes. If not, consider doing so. As an employer, you may create a federal and/or provincial or territorial TD1 Personal Tax Credits Return form and have your employee send it to you electronically rather than send you the actual completed Form TD1.

The Canada Revenue Agency (CRA) and Revenu Quebec (RQ) cannot provide you with any advice or guidance in developing an electronic product. As long as the following conditions are met, you will be allowed to create, maintain, and store the TD1 Personal Tax Credits Return forms electronically (and Quebec equivalent). Since there will be no written signature on the TD1/TP-1015.3-V, security measures must be in place to authenticate the employee’s identity, for example a password system or an employee self-service portal.

In addition, the electronic forms have to:

  • be made available and accessible to the CRA/RQ when requested and be maintained in a format that can be read by representatives of the CRA/RQ
  • mirrors the CRA/RQ approved TD1/TP-1015.3-V paper form
  • include a certification confirming that the information given by the employee is accurate. For example, clicking on a button saying “I agree” to a statement that is similar to the certification statement on the paper Form TD1 / TP-1015.3-V return (i.e. the information is correct and complete to the best of his or her knowledge)
  • be in a format that cannot be altered. In other words changes can only be made if your employee submits a new Form TD1 / TP-1015.3-V
  • include a date so you can tell when your employee submits a new Form TD1 / TP-1015.3-V to you
  • meets all of the CRA’s general guidelines on record retention and on electronic records, which can be found in information circular IC78-10R, Books and Records Retention/Destruction

Finally, the use of the electronic form will not relieve you of your responsibility to review the completed forms for reasonableness. You should communicate with a tax services office if you have any concerns that a completed Form TD1 / TP-1015.3-V might contain a false or deceptive statement.

DON’T FORGET TO BRING THE LETTER “L” TO YOUR PAY DEPARTMENT

by Kimberley Fiume | on Jul 29, 2019 | No Comments

By: W. Peter Randall

In business we tend to think of accounting, payroll, budget and insurance for example as very conservative, slow to change, traditional, ‘button on the shirt, collar starched’, straight laced departments.

When one runs a busy payroll department, one can easily let themselves and their colleagues get bogged down in the day to day grind of; endless pay processing, fire fighting, deadlines and commitments. These departments can then become boring, tedious, unjoyful places to work, mired in redundancy. One can change this by bringing the letter ‘L’ to your pay department.

Quite simply, if we make ‘L’ the second letter of pay, we arrive at the provocative verb, ‘play’ which means quite simply, ‘to engage in an activity for enjoyment and recreation rather than a serious or practical purpose’.

What, heaven forbid! A payroll department having fun? But how can they be concentrating on such serious work and achieving the 99-100% accuracy and correctness ratio their chosen career demands you say?

I put forward that it is exactly and precisely this attitude and atmosphere that makes such gaudy targets achievable.

Recently while working as a Consultant for Leading Edge Payroll Group, I served a sixteen-month stint as ‘Interim Director of Payroll’ for a client. The client’s payroll is multi-province, encompasses some 85 collective agreements, is spread across three very disparate payroll systems and is responsible for disbursing pay for over 12,000 employees.

In this challenging role I had 20 payroll staff and an absolute full slate of improvement and redesign projects on the go. When I came into this position, I started regular weekly payroll team meetings and when I would draft agendas, I would simply have endless items that I thought I must address.

I could quickly see there was no way to fit even half of these items into what I was determined would only be one-hour meetings each week. My immediate approach to seeing how much there was to cover in each meeting, was to give myself less time.

I slotted the first 10 minutes each week for PLAY, sharing, engagement, laughing – in short, I called it, ‘getting away from payroll’. No matter how much we had on our plate or how urgent things were, I always held fast to this promise to my team.

In my mind, we were just way too busy to start the meetings with work. The daily workload placed upon our group was such that it was demanding razor focus, superlative attitude and exceptional team work and cooperation.

We therefore really needed to escape the stress and pressure in these meetings and yet use the time productively to build the team and get to know one another better and more personally.

Now I am by nature a story teller, and I would one week talk of my many overseas travel and volunteer trips and then ask others to share their experiences. Another time I would talk about my three amazing children and my family and then ask others to share.

One week we would play an ice breaker game, another week see an engaging, inspirational or humorous video (for example we watched teenagers try to use a rotary phone!). We then explained why this was so funny to the younger folks in the department and I went into a discussion about how we all come from such different backgrounds, cultures and generations, that we need to constantly understand and remember we all see things so differently.

Just as one of us being age 50 finds using a rotary phone so very easy, another of us at 23 years of age can be confused. This is exactly the same as our payroll department, we may think one a slow learner who is new to our department. However, if we step back, we may realize he or she is; new to Canada, English is their second language and they were last doing Australian payroll in India! All of a sudden, they may not seem such a slow learner, rather the situation is that they simply have all of our jargon, terminology and English double speak added on top of learning the new software.

One week for a special break I played a 20-minute Stuart Mclean, Dave and Morley, Vinyl Café story. (The late Stuart McLean is an iconic Canadian author and radio broadcaster). If Stuart is unfamiliar to you, think heartwarming, family stories for every age and gender such as Mitch Albom captivates us all with.

Staff members came to love these times where we, ‘got away from payroll’ and many commented on them on my last day when my contract came to an end and the new full time Director was to start on the Monday. You see, when one Payroll Administrator starts to talk about making a cake for her cats’ birthday (this as we were all discussing a story of our child and this was her ‘child’), she later tends to offer up a payroll suggestion or adds to a payroll discussion.

The admins and managers tend to find their voice early in the meeting discussing very comfortable subjects in front of the ‘scary Director’ and such a big group. Therefore, later when I say, ‘what approaches do you suggest on our PTO (personal time off) problem’, otherwise silent voices engage and speak freely and naturally. This is not always common in many meetings through my career, often management can ‘preach down at staff’ and so many great ideas and approaches are held in by the silent. Every voice matters and MUST be heard, it was a part-time minimum wage staffer who suggested breakfast to his McDonalds employer. The astute leader hires staff to learn from them and listen to them as importantly as to teach, guide and direct them.

Now to be sure this attitude of play and comradery must be maintained outside of meeting times; the proverbial open-door office is a start, but it must go far beyond this. When anerror is brought forward, we can make the admin feel less nervous and on the spot by talking about when we made a similar booboo or speaking of how many good things they did this week.

Humor and play to me in a stoic, conservative Payroll department are as essential today as the ubiquitous computer is to us. We need to laugh with each other, not at each other. We need to share and learn about the others’ outside life, hobbies, family and aspirations.

Recruitment can in some ways be considered a time sensitive, pressured, emergency room that one must operate in when retention fails. Retention often fails when engagement is lacking as statistics and exit interviews show that more employees leave managers and departments than they do salaries or companies.

One can reverse this and operate in a much more casual, stress-free ER earlier in the process by simply focusing on ‘Engaged Retention’ all through their reports work days.

So, don’t forget to bring the letter ‘L’ to your department meetings and personal work interactions. The only bad joke (when one is tasteful and respectful) is the loss of a great employee because they are too stressed, too bored or simply not feeling appreciated or engaged.