Compensation Communiqué 2012-05-01

May 01 2012

Subject: Tax Adjustment Factors for Ontario Residents who work in Québec

It has come to our attention that some employees, who work in the province of Québec and reside in the province of Ontario, had an insufficient amount of income tax deducted at source for the 2011 taxation year.

Federal and provincial (for all provinces except Québec) income tax deductions at source are calculated based on the formulas provided by the Canada Revenue Agency (CRA).

The amount of Québec provincial income tax deducted at source for an Ontario resident who works in Québec is calculated by applying a percentage of the federal income tax deduction amount. The applicable percentage is based on the bracket corresponding to the employee's projected annual earnings, as provided by the CRA.

Each year, the federal tax brackets change which impact the corresponding tax adjustment factors. Furthermore, since 2010, some tax adjustment factors have decreased.

In 2010, the tax adjustment factors for Ontario residents who worked in Québec were as follows:

  • Annual earnings more than $0 – not more than $40,970 = 61%
  • Annual earnings more than $40,970 – not more than $81,941 = 73%
  • Annual earnings more than $81,941 – not more than $127,021 = 86%
  • Annual earnings more than $127,021 = 89%

In 2011, the tax adjustment factors for Ontario residents who worked in Québec were as follows:

  • Annual earnings more than $0 – not more than $41,544 = 67%
  • Annual earnings more than $41,544 – not more than $83,088 = 73%
  • Annual earnings more than $83,088 – not more than $128,800 = 75%
  • Annual earnings more than $128,800 = 81%

The 2012 tax adjustment factors for Ontario residents who work in Québec are as follows:

  • Annual earnings more than $0 – not more than $42,707 = 67%
  • Annual earnings more than $42,707 – not more than $85,414 = 72%
  • Annual earnings more than $85,414 – not more than $132,406 = 75%
  • Annual earnings more than $132,406 = 80%

As an example, an employee who earns $82,000/year since 2010 and had a total of $15,000 federal tax deducted at source each year, would have seen his/her provincial tax deduction at source decreased from $12,900 (86%) in 2010 to $10,950 (73%) in 2011 and down to $10,800 (72%) in 2012. Depending on an employee's personal situation, this could result in not having had sufficient provincial tax withheld, and thus require a tax payment when the annual tax filing occurs.

Employees, who wish to have an additional amount of federal income tax deducted at source, may do so by completing a TD1 2012 Personal Tax Credits Return form and sending it to their compensation advisor. Employees in departments or agencies that have access to the Compensation Web Applications (CWA) can activate their own additional tax deduction through the "Voluntary Deductions" option. The advantage of activating any voluntary deduction through CWA directly is that the deduction is processed immediately. However, as required by the CRA, even though employees can activate their own additional tax deduction amount, they must still complete and send the TD1 E (2012) to their compensation advisor.

Any inquiries on the information contained in this document should be addressed to your Public Works and Government Services Canada (PWGSC) Compensation Services Office.

Original Signed by
Carrie E. Roussin

Carrie E. Roussin
Director General
Compensation Sector
Accounting, Banking and Compensation

Reference(s): CJA

Tax Adjustment Factors for Ontario Residents who Work in Québec

It has come to our attention that some employees, who work in the province of Québec and reside in the province of Ontario, had an insufficient amount of income tax deducted at source for the 2011 taxation year.

Federal and provincial (for all provinces except Québec) income tax deductions at source are calculated based on the formulas provided by the Canada Revenue Agency (CRA).

The amount of Québec provincial income tax deducted at source for an Ontario resident who works in Québec is calculated by applying a percentage of the federal income tax deduction amount. The applicable percentage is based on the bracket corresponding to the employee's projected annual earnings, as provided by the CRA.

Each year, the federal tax brackets change which impact the corresponding tax adjustment factors. Furthermore, since 2010, some tax adjustment factors have decreased.

In 2010, the tax adjustment factors for Ontario residents who worked in Québec were as follows:

  • Annual earnings more than $0 – not more than $40,970 = 61%
  • Annual earnings more than $40,970 – not more than $81,941 = 73%
  • Annual earnings more than $81,941 – not more than $127,021 = 86%
  • Annual earnings more than $127,021 = 89%

In 2011, the tax adjustment factors for Ontario residents who worked in Québec were as follows:

  • Annual earnings more than $0 – not more than $41,544 = 67%
  • Annual earnings more than $41,544 – not more than $83,088 = 73%
  • Annual earnings more than $83,088 – not more than $128,800 = 75%
  • Annual earnings more than $128,800 = 81%

The 2012 tax adjustment factors for Ontario residents who work in Québec are as follows:

  • Annual earnings more than $0 – not more than $42,707 = 67%
  • Annual earnings more than $42,707 – not more than $85,414 = 72%
  • Annual earnings more than $85,414 – not more than $132,406 = 75%
  • Annual earnings more than $132,406 = 80%

As an example, an employee who earns $82,000/year since 2010 and had a total of $15,000 federal tax deducted at source each year would have seen his provincial tax deduction at source decreased from $12,900 (86%) in 2010 to $10,950 (73%) in 2011, down to $10,800 (72%) in 2012. Depending on your personal situation, this could result in not having had sufficient provincial tax withheld, and thus require a tax payment when you file your annual tax return.

Note that the tax adjustment factors are calculated and provided by the CRA, and are based on the federal tax brackets which can differ from the provincial tax brackets.

If you wish to have an additional amount of federal income tax deducted at source, you may do so by completing a TD1 2012 Personal Tax Credits Return form and sending it to your compensation advisor. If your department or agency has access to the Compensation Web Applications, you can activate your own additional tax deduction through the "Voluntary Deductions" option. The advantage of activating any voluntary deduction through CWA is that the deduction is processed immediately. Please note that, even though you activate your own additional tax deduction amount, the CRA requires that you still complete and send the TD1 E (2012) to your compensation advisor.

Any request for information regarding the content of this document should be addressed to your compensation advisor.