ARCHIVED CD 2002-012
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March 26, 2002
SUBJECT: Deductions at Source of Additional Income Tax
1.1 The purpose of this directive is to remind clients that employees can request that deductions of additional income tax be withheld at source and why the employee may decide to have this deduction.
1.2 In this text, use of the masculine is generic and applies to both men and women.
2.1 For employees, the calculation of income tax at source is based on the taxable income earned by the employee and the income tax rates in effect for the province of employment at the time the payment is issued.
2.2 The only exception to the above is for employees who work in the province of Quebec and reside in a different province. For these specific employees, a special tax arrangement was agreed upon by the Ministère du Revenu du Québec (MRQ) and >the Canada Customs and Revenue Agency (CCRA). This arrangement ensured, to the greatest extent possible, that the total amount of tax withheld would approximate the amount that would have been withheld had the employee worked in his province of residence. As a result, the "Tax Adjustment Factor" formula was introduced for employees who work in Quebec and reside in another province. The Tax Adjustment Factor is an averaged single provincial tax rate provided by CCRA which is used to calculate income tax at source on all taxable income levels regardless of the income tax bracket the employee would be taxed at upon filing his income tax return.
It has now been ascertained that in some situations, insufficient tax may be deducted at source, particularly for high income earners.
2.3 Employees who are residents of a province other than the one in which they work may wish to have additional income tax withheld at source depending on their personal situation.
2.4 Any employee who has another source of taxable income not paid through the Regional Pay System (RPS) may owe CCRA and/or MRQ upon the filing of his income tax return. Employees in this situation may also wish to have additional income tax withheld at source depending on their personal situation.
3.1 An employee who feels that he may owe income tax upon filing may have additional income tax deducted at source as follows:
- Additional Federal Income Tax : any employee may have additional federal income tax withheld at source.
- Additional Quebec Income Tax : only an employee who is a Quebec resident may have additional Quebec income tax withheld at source.
4.1 Compensation Advisors are to ensure that employees are made aware of or are reminded on an annual basis that there is currently an existing facility within the RPS whereby additional Federal or Quebec income tax can be deducted at source.
4.2. Additional Federal Income Tax Deductions
Deduction code 796 "Income Tax Additional Fixed Amount - Federal WL" and deduction code 727 "Income Tax Additional Fixed Amount - Federal NWL" can be utilized to have additional federal income tax deducted from an employee's pay. An employee who wishes to have additional federal income tax deducted at source may do so by completing the pertinent section of the form Federal TD1 "Personal Tax Credits Return". Additional tax deductions authorized by the Federal TD1 are to be reported as a pay period amount and will remain in effect until an amended Federal TD1 is filed. Please refer to the Personal-Pay Input Manual (PPIM) 9-5-4 for input requirements. This form is available from CCRA Tax Services Offices and at the following Internet address: TD
4.3. Additional Quebec Income Tax Deductions
Deduction code 799 "Québec Income Tax - Additional Fixed Amount" can be utilized to have additional Quebec income tax deducted from an employee's pay. An employee who wishes to have additional Quebec income tax deducted at source may do so by completing the pertinent section of the form TP-1015.3-V "Source Deductions Return". Additional tax deductions authorized by the employee on the TP-1015.3-V are to be reported as a pay period amount and will remain in effect until the employee provides an amended TP-1015.3-V. Please refer to PPIM 9-5-4 for input requirements. This form is available from the MRQ offices and at the following Internet address: TP-1015.3-V
4.4. Estimating the Amount to Deduct as Additional Federal or Quebec Income Tax
To estimate the amount of additional tax to be deducted for an employee who is currently working in a province other than the province in which he resides or if he had other taxable income from different sources, the employee should base his estimate on the amount of money he owed the previous year upon filing his income tax return. Divide this amount by the number of pay periods remaining in the current year. This pay period amount is to be reported on the appropriate form as described herein.
To estimate the amount of additional tax to be deducted for an employee whose place of employment changes during the current year to a province other than that in which he resides, the employee should compare the amount of tax that was deducted on his pay stub that was issued, prior to working in the new province of employment, to the amount of tax that was deducted on his pay stub while working in the new province of employment. He should complete the appropriate form indicating the difference in these amounts when the new tax deduction amount is less than the previous tax deduction amount.
5.1 Any request for information regarding the foregoing should be addressed to your Public Works and Government Services Canada (PWGSC) Compensation Services Office.
Original Signed by
Government Operational Service
Reference: CJA 9007-7, 9007-8
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