Reducing Payroll Deductions

If you are making RRSP contributions or paying deductible spousal support, you may be able to reduce the income tax deducted from your pay cheque.

One method is to ask your employer to make the contribution(s) to your RRSP or make the support payments and deduct the payments from your salary. The employer calculates the required income tax withholding based on the portion of the salary remaining after these deductions. Be prepared to provide evidence to your employer that the RRSP contributions and/or support payments will be deductible by you.

Alternatively, complete Form T1213, Request to Reduce Tax Deductions at Source, and file it with the Client Services Division of your Tax Services Office. If accepted, your employer will be authorized to reduce your payroll withholding. In addition to RRSP contributions and spousal support payments, the T1213 process allows payroll deductions to be reduced for child care expenses, charitable donations, employment expenses, rental losses, interest and carrying charges on investment loans. Support for such deductions must accompany the T1213.

The Institute of Chartered Accountants of Alberta provides information for Tax Tips as a public service.

Do you earn a regular income from tips and gratuities?

Waiters, waitresses and other people who earn regular income from tips and gratuities should keep a diary of the amounts they receive. Just because the money is in cash and records may not be kept doesn't mean Canada Revenue Agency (CRA) will forget about it.

If the amount you report is different from the average and CRA decides to ask why, you must be able to back your figures up. Although you don't have to send a diary in with your tax return, you should have one available for examination. If you receive lower-than-average tips, a diary may prevent an unfair assessment by CRA.

The Institute of Chartered Accountants of Alberta provides information for Tax Tips as a public service.

Employment Benefits

In general, when employers provide employees with benefits in addition to a regular salary, an amount must be included in their income as a taxable benefit. However, an employee may receive certain fringe benefits tax-free.

For example, premiums for the basic medical services plan are considered a taxable benefit but premiums for extended health and dental plans are not.

Something for employees to consider is the non-taxable benefit of premiums to a group insurance plan. If your employer pays the premiums to certain sickness, accident, or disability insurance plans, you will be taxed on the benefits received from the insurance. If you pay the premiums yourself, you will receive the benefits tax free. Therefore, careful consideration should be taken as to who pays the premiums as this could result in a cash flow problem for a disabled person relying on disability insurance payments.

Contact a Chartered Accountant if you have any questions about the advantages of paying for group insurance premiums yourself.

The Institute of Chartered Accountants of Alberta provides information for Tax Tips as a public service.