Federal and provincial/territorial TD1 forms are filled out by all employees to claim personal tax credits and are used to determine income tax deductions from their gross pay.
How does it work?
Your employees will have to complete both the federal and provincial/territorial TD1 forms. This is done by filling out and following the instructions on each line of both forms. The amounts on these lines are then added together and the total is put into the last line of page 1 that says “Total Claim Amount.”
The federal TD1 form will need lines 1-12 added together and the total entered into line 13. The number of lines on the provincial/territorial TD1 forms vary between provinces and/or territories. Both the federal and provincial/territorial governments provide worksheets for employees to use when calculating claim amounts.
The total claim amount entered on these forms is used to determine the amount of income tax to be deducted per pay period from your employees' gross pay amounts.
Both federal and provincial/territorial TD1 forms and worksheets can be found here. You will see the federal form and worksheet and the top of the page with the provincial/territorial forms listed alphabetically below.
Because individuals are only allowed to claim personal tax credits once, employees with more than one employer/payer will mark this on the second page of both their federal and provincial TD1s. This means they will be claiming 0 personal tax credits in the Total Claim Amount line on both forms.
Who must complete these forms?
Employees that must fill out TD1 forms include:
- New employees
- Employees wanting to change the amount they had claimed previously
- Employees wanting to increase the amount of income tax deducted per period
- Employees living in a prescribed zone and are wanting to claim the deduction
New TD1 forms do not have to be filled out by employees on a yearly basis unless there is a change to the personal tax credit amounts. If an employee has a change to their personal tax credit amounts on either form, the employee must complete and give you a new form within 7 days of the change.
These are to be kept in your records as an employer, and are not to be filed with the Canadian Revenue Agency (CRA). That being said, you must be able to provide these forms if asked by the CRA.
In recent years, the CRA has suggested using electronic TD1 forms as an alternative to paper forms. They have provided more information and guidelines on this process on their webpage here.
What’s the difference between the Federal and Provincial TD1?
In addition to claiming personal tax credits for income tax purposes, the federal TD1 form is used to request additional income tax to be deducted per payment/pay period.
The federal and provincial governments have different basic personal exemption amounts that are to be included in the Total Claim Amount and used to determine the respective income tax deductions. As well, each government maintains different rules surrounding various tax credit claim calculations.
You will take the total claim amount and enter this into the employee tax details.
- Under the Payroll tab on the left-hand menu, click Employees.
- Click the name of the employee.
- Click Tax Details.
- In the employee's Tax Details you will be able to enter the claim amounts they have given on their both TD1 forms.
- Click Save.
If you do not enter any amounts, Wave will default to the basic personal claim amounts for both federal and provincial/territorial.
The deducted taxes are then remitted to the government on the employee's behalf by you, or you can authorize Wave to remit your payroll taxes for you.