The CRA tackles some common questions about payroll deductions
The Customs Revenue Agency (CRA) has posted the following questions and answers about payroll deductions and the new Ontario health premium:
Do I have to show the Ontario health premium deduction as a separate item on an employee's pay statement?
No. Include the premium in the total federal and provincial tax deducted at source.
Are there special procedures because this premium is being implemented in mid-year?
The rates for 2004 will be one half of the 2005 rates. The 2004 premium will be collected over the remaining six months of 2004.
How do I report the Ontario health premium on the T4 slip at the end of the year?
Do not report the Ontario Health Premium as an individual item. Include the premium in the box for total federal and provincial tax deducted at source.
What if some employees end up not paying enough Ontario health premium or paying too much?
When employees file their individual income tax return for 2004, the amount of tax they have to pay (including the premium) is calculated and compared to the amounts they had deducted at source. This determines if they will get a refund or have a balance owing. Persons who receive income with no tax deducted (such as rental or investment income) may want to have their employer withhold more income tax by completing Form TD1, Personal Tax Credits Return. Individuals who currently pay income tax by instalments will get information with their next reminder about increasing their instalments for the year.
How are employees who work in one province but live in another affected by the Ontario health premium?
Everyone who works in Ontario will have the premium deducted with tax, while those who work outside Ontario will not have it deducted. Source deductions are based on the province of employment (usually where the employee reports for work). When employees file their tax returns, their total taxes deducted for the year (including the premium) will be reconciled against their total tax payable for the year for their province of residence.
If an employee is currently an Ontario resident but will not be one on Dec. 31, should I deduct the Ontario health premium at source?
The Ontario health premium should be treated the same as other provincial taxes and deducted along with the rest of income tax. If an employee moves to another province before the end of the year, she would pay provincial tax for that province and not pay Ontario tax for the year. Ontario tax that was already deducted would be refunded or credited against the tax she owes to the other province.
But if an Ontario resident moves out of the country before the end of the year, she usually has to pay Ontario tax for that year. In either case a reconciliation would be done when the individual files her tax return for that year.
Is the Ontario health premium included in the payroll deductions tables effective July 1, 2004?
Yes. The Ontario Health Premium is built into the amounts shown in the Payroll Deductions Tables (T4032), Payroll Deductions Supplementary Tables (T4008), and Tables on Diskette (T4143) for July 1, 2004. You do not need to add any extra amounts to what is in the tables. We have also revised our publication called Payroll Deductions Formulas for Computer Programs (T4127) to include the calculation for the Ontario health premium.
Do I have to show the Ontario health premium deduction as a separate item on an employee's pay statement?
No. Include the premium in the total federal and provincial tax deducted at source.
Are there special procedures because this premium is being implemented in mid-year?
The rates for 2004 will be one half of the 2005 rates. The 2004 premium will be collected over the remaining six months of 2004.
How do I report the Ontario health premium on the T4 slip at the end of the year?
Do not report the Ontario Health Premium as an individual item. Include the premium in the box for total federal and provincial tax deducted at source.
What if some employees end up not paying enough Ontario health premium or paying too much?
When employees file their individual income tax return for 2004, the amount of tax they have to pay (including the premium) is calculated and compared to the amounts they had deducted at source. This determines if they will get a refund or have a balance owing. Persons who receive income with no tax deducted (such as rental or investment income) may want to have their employer withhold more income tax by completing Form TD1, Personal Tax Credits Return. Individuals who currently pay income tax by instalments will get information with their next reminder about increasing their instalments for the year.
How are employees who work in one province but live in another affected by the Ontario health premium?
Everyone who works in Ontario will have the premium deducted with tax, while those who work outside Ontario will not have it deducted. Source deductions are based on the province of employment (usually where the employee reports for work). When employees file their tax returns, their total taxes deducted for the year (including the premium) will be reconciled against their total tax payable for the year for their province of residence.
If an employee is currently an Ontario resident but will not be one on Dec. 31, should I deduct the Ontario health premium at source?
The Ontario health premium should be treated the same as other provincial taxes and deducted along with the rest of income tax. If an employee moves to another province before the end of the year, she would pay provincial tax for that province and not pay Ontario tax for the year. Ontario tax that was already deducted would be refunded or credited against the tax she owes to the other province.
But if an Ontario resident moves out of the country before the end of the year, she usually has to pay Ontario tax for that year. In either case a reconciliation would be done when the individual files her tax return for that year.
Is the Ontario health premium included in the payroll deductions tables effective July 1, 2004?
Yes. The Ontario Health Premium is built into the amounts shown in the Payroll Deductions Tables (T4032), Payroll Deductions Supplementary Tables (T4008), and Tables on Diskette (T4143) for July 1, 2004. You do not need to add any extra amounts to what is in the tables. We have also revised our publication called Payroll Deductions Formulas for Computer Programs (T4127) to include the calculation for the Ontario health premium.
